The official version was that he was a relatively senior trader with a small German regional bank in Dusseldorf, who inexplicably took a reckless bet on German bond futures.
But City sources suggested this is a story to cover up a failure in the Eurex electronic trading system used by dealers in the German bond market.
The most colourful report is that a junior trader working for ABN Amro in London was conducting a training exercise when his "imaginary" deals suddenly went live and were pounced on by other dealers. However, ABN Amro denied they were involved.
What is known is that early on Tuesday City traders were astonished to see tens of thousands of Bund futures, a derivative based on the price of German government bonds, up for sale. "Suddenly a huge amount of contracts appeared on screens," said a trader. "We were gobsmacked." Another said that at one point 80,000 contracts were being offered.
Under electronic trading rules, the bank making such offers would have to honour its deals, leading to huge losses. Many other fingers may also get burnt.
The trades took place on Eurex, the electronic trading system used by the German futures exchange, Deutsche Terminborse (DTB). Frantic moves were immediately made to try to cancel what was going on. But it was only after about 25,000 contracts had been completed that the DTB noticed something might be wrong and phoned the dealing room.
It was suggested that the fault could have lain with Eurex, and that its engineers running tests somehow corrupted the system so the trader was suddenly dealing in the real world.
Eurex denied the junior trader theory, saying it was technically impossible. An official said what really happened was that a trader at a small regional German bank had taken a bet on German bond futures that had gone badly wrong.Regulators are thought to be investigating whether the trader exceeded trading limits.
A City source said: "This should not have happened. The ... system should reject a trade that size."Reuse content