Two ex-JPMorgan employees charged in ‘London whale’ case
U.S. officials yesterday lodged criminal charges against two former JPMorgan Chase employees accused of concealing hundreds of millions of dollars in trading losses in an episode that cast a sour light on the bank’s high-risk investments.
Javier Martin-Artajo, head of credit and equity trading at JPMorgan’s investment unit, and Julien Grout, a trader who worked for him, were charged with wire fraud, filing false information with the Securities and Exchange Commission and other crimes as part of an alleged conspiracy to hide mounting trading losses on derivatives investments assembled in the bank’s London office.
Losses stemming from that unit eventually topped $6 billion.
The charges are the first filed in the so-called “London whale” case, so named because the portfolio of a single trader, Bruno Iksil, grew so massive with extensive investments in so-called credit default swaps.
The investments had proven profitable for JPMorgan, but began generating large losses in early 2012 that Martin-Artajo, Grout and Iksil himself worked together to try to conceal, according to the federal charging documents. Iksil is now cooperating with authorities and, according to a statement released by federal officials yesterday, will not be prosecuted.
JPMorgan Chairman Jamie Dimon has referred to the episode as the “most embarrassing” of his career. A company spokesman declined to comment.
At an afternoon press conference in New York, U.S. attorney Preet Bharara said he felt the case reflected poorly on JPMorgan’s risk controls and culture, and he offered a tacit criticism of Dimon, who initially dismissed concerns about the bank’s investment unit as a “tempest in a teapot.”
“This was not a tempest in a teapot, but rather a perfect storm,” Bharara said.
Both Martin-Artajo and Grout are based in Europe. Their lawyers did not respond to requests for comment. If convicted, they face up to five years in prison.