U.S. charges two ex-JPMorgan bankers over 'London Whale' loss

Wed Aug 14, 2013 4:37pm EDT
 
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By Emily Flitter

NEW YORK (Reuters) - U.S. prosecutors brought criminal charges on Wednesday against two former JPMorgan Chase & Co employees in the trading scandal that cost the bank $6.2 billion last year, but the trader nicknamed "the London Whale" because of the size of losses was not one of them.

Trader Bruno Iksil, who is cooperating with federal prosecutors, pushed back against the efforts of his former colleagues Javier Martin-Artajo and Julien Grout to hide the mounting losses, according to court filings.

Manhattan federal prosecutors charged Martin-Artajo and Grout, who each worked for JPMorgan's chief investment office in London, with wire fraud and conspiracy to falsify books and records related to the trading losses.

The charges, the first to arise from a Federal Bureau of Investigation probe into the Whale scandal, say the two deliberately tried to hide hundreds of millions of dollars in losses on trades in a portfolio of synthetic credit derivatives tied to corporate debt. Such derivatives are financial instruments designed to bet on the probability of corporate default.

Manhattan U.S. Attorney Preet Bharara said the incident shows how much damage a small group of traders can do to a major bank.

Losses from the trades, which were made in the London division of JPMorgan's chief investment office, first became public in April 2012 in a media report about the squeeze put on Iksil's group by competitors in the market.

"This was not a tempest in a teapot, but rather a perfect storm of individual misconduct and inadequate internal controls," said Bharara at a press conference announcing the charges. He was referring to a comment made by JPMorgan CEO Jamie Dimon, who initially dismissed the losses as a "tempest in a teapot," a comment that would come back to haunt the man who runs the nation's largest bank.

It is unclear when Martin-Artajo and Grout will come to the United States to be formally arraigned. Grout, who is French and is married to an American, is living with his parents in France and Martin-Artajo, who is Spanish, lives in London with his wife and children. If the men do not agree to appear voluntarily, U.S. authorities will seek to extradite them.   Continued...

 
A woman walks past JP Morgan Chase's international headquarters on Park Avenue in New York July 13, 2012. REUTERS/Andrew Burton