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US indicts 2 ex-JPMorgan traders in London Whale case

August 15, 2013 at 1:21 am | News Desk

JP-Morgan-Chase-BuildingNEW YORK CITY, New York: The US Wednesday charged a pair of former JPMorgan Chase traders with fraud in connection with the 2012 $6.2 billion “London whale” trading losses.

Federal prosecutors filed criminal charges against Javier Martin-Artajo and Julien Grout, alleging the two men kept false records on the trades, committed wire fraud and submitted false US securities filings.

The charges are the first criminal case to stem from last year’s mammoth trading loss. The Securities and Exchange Commission also filed parallel civil charges against the two men alleging securities fraud.

A third ex-JPMorgan official involved in the trades, French national Bruno Iksil — originally identified as the “London Whale” responsible for the trades — was cleared of criminal responsibility after cooperating with prosecutors.

Martin-Artajo, a Spaniard, and Grout, also from France, are charged with falsifying documents “in order to conceal hundreds of millions of dollars in losses” in the bank’s chief investment office as the losses were mounting, according to a court filing.

JPMorgan misstated its quarterly financial results “based in part on false and fraudulent information” provided by Martin-Artajo and Grout, the indictments said.

Martin-Artajo’s lawfirm had no comment Wednesday. The firm Tuesday released a statement that said Martin-Artajo would be “cleared of any wrongdoing.”

An attorney for Grout could not be reached for immediate comment. His attorney, Edward Little, told AFP Tuesday that his client “has done nothing wrong.”

Martin-Artajo, Iksil and Grout all worked together on the London trading team, with Grout reporting to Iksil and Iksil reporting to Martin-Artajo.

The complaint against Martin-Artajo documents how he allegedly falsified financial records after he was pressured from higher-ups about losses in early 2012.

Martin-Artajo directed underlings to discount the losses and count positions in ways that departed from company practice of making a good faith effort to price assets at mid-market levels, according to the complaint.

The complaint cites phone calls and emails from an unnamed employee urging Martin-Artajo to revise pricing practices to more accurately reflect losses.

As a result of the false records, JPMorgan in July 2012 restated losses from its corporate private equity division, which included the London trading operation, by $459 million.

JPMorgan at the time said new information “raises questions about the integrity” of how traders reported the value of their positions, and that “certain individuals may have been seeking to avoid showing the full amount of the losses,” according to the US complaint.

The indictments are the first in the wake of the debacle, which led to senior bank resignations, slashed pay for JPMorgan chief executive Jamie Dimon and a plethora of government probes.

JPMorgan declined comment Wednesday.

The bank is in talks with the Securities and Exchange Commission to resolve civil charges stemming from the case. The agency is pressing for an admission of wrongdoing in the case, according to media reports.

The London whale case is one of several regulatory headaches still facing JPMorgan. The bank also faces probes on its sale of mortgage-backed securities, among other issues

The government also released its agreement not to prosecute Iksil in exchange for cooperation.

The deal calls on Iksil to “truthfully and completely disclose” all information on the issues, provide all relevant documents, truthfully testify in any proceedings and disclose “all crimes which he has committed.”

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