Michael Seamark/Daily Mail

Paris, Jan 25: The world's biggest rogue trader was in hiding last night after losing £ 3.7billion through fraud.

Jerome Kerviel, 31, is suspected of illegally gambling up to £60billion on stock market movements.

French authorities have launched a criminal investigation into his dealings at Societe General, the country's second biggest bank.

Kerviel's losses dwarf the £800million squandered by Nick Leeson that sank Barings Bank in 1995.

The Englishman admitted to feeling a "sickening twinge of recognition" when he heard the news yesterday.

Paris-based Kerviel worked in Societe's Delta One trading department, betting on whether stock markets will move up or down.

He had been betting they would rise but share prices plunged on Monday and Tuesday, leaving his employers massively out of pocket.

They believe he was taking massive risks in an attempt to boost his bonuses, which, his salary included, amounted to a relatively modest £75,000 last year.

Societe General has filed an official complaint with Paris prosecutors accusing him of falsifying records and computer fraud.

Last night, union officials briefed by the French bank suggested Kerviel had been suffering from "family problems" and "might have lost his mind a bit".

Colleagues at the bank described him as a "clean-cut, hard-working career banker who had never been in trouble in the past".

One said: "None of us had any inkling of what he was up to. He put in the hours and was always trying to advance himself in his career, but he was by no means a high-flyer.

"He was polite and good to deal with but never made the breakthrough into the big-money league. He is not a member of the Paris-educated elite who get all the best jobs in banking and finance."

Kerviel joined the bank in 2000 after studying for a masters degree in finance at a business school in Lyon, his home city.

One of his former teachers, Gisele Reynaud, said: "He was a nice guy. He was brilliant."

Kerviel worked for five years in his Paris bank's "back office" which monitors trading and two years ago won promotion to the Delta One trading desk

Kerviel's boss Daniel Bouton described him as an "imprudent employee".

He said: "We analysed his methods - it was impossible for him to work with other people. He had to set up fake positions in real time. I am convinced he was acting alone. It doesn't seem that he was able to benefit from these colossal trades. He's not received a bonus this year, and probably won't be asking for one."

Mr Bouton said financial controllers at the bank - which has an office in London employing more than 2,000 staff - had found "something fishy" last Friday night and by Saturday realised "an exceptional fraud" had taken place.

He said Kerviel had set up a fictional company to allow him to carry out rogue deals.

"The ghost trader had in-depth knowledge of the control procedures resulting from his former employment in the middle office," said Mr Bouton.

"He managed to conceal these positions through a scheme of elaborate fictitious transactions."

"He constructed a fictitious company and was intelligent enough to get around all controls. He acted very subtly but was trapped when he made a mistake."

On Saturday night, Kerviel was grilled for six hours by his bosses but news of the astonishing fraud was suppressed until yesterday.

On Monday when markets opened the bank desperately set about cancelling his bets.

But the unexpected global meltdown of markets that day meant the losses were even more disastrous than they had feared.

When asked if he regretted not calling in the authorities immediately, Mr Bouton said: "Perhaps we made a mistake in that respect, but the authorities will pass judgment on it.

"My duty was to avoid adding to the terrible consequences of this fraud."

The bank said it was just bad luck that the fraud was discovered amid this week's market turbulence.

Mr Bouton said "We were really unlucky but we had to settle these positions as fast as we could and we did so during the three-day market crisis."

Initially, the bank's losses were put at £1.2billion but, with global markets in freefall on Monday, those losses jumped to £3.7billion.

If the bank had held out a little longer before cancelling the bets, the losses might have fallen because the markets bounced back.

Playing roulette on the world stock market

Using the bank's funds, traders like Kerviel take positions - or bets - on which way they think the world stock markets will move.

Unfortunately for Societe Generale, their man completely misjudged the markets in January and kept betting the wrong way - that markets would rise.

When his bosses found out what he had been up to - and what he stood to lose - they immediately decided to pay financiers to take on their "positions" at a cost of £3.7billion.

Societe Generale said Kerviel - described as a "computer genius" trading at the lower end of the scale - had confessed to fraud during interviews and had been suspended.

Some investors wondered whether the bank's manouevres had contributed to Monday's worldwide market fall, and to the U.S. Federal Reserve's decision to cut interest rates.

But Far East financial sources, where the market rout began, said there had been no knowledge of the problems.

And in Washington a Fed source said the central bank had not been aware of the French bank's problems in advance.

The Bank of France, the country's central bank, is investigating the trades.

Christian Noyer, its governor, said Societe General had been able to overcome the crisis because it was so solid.

"There was a glitch in the system that was exploited by someone who I think got round five successive risk control systems so who was without doubt a genius of fraud," Mr Noyer said.