London Whales Bet Against JP Morgan
The traders involved in the London Whale trading fiasco apparently bet against the very derivatives positions placed by its chief investment office, according to three people familiar with the matter. The US Senate Permanent Committee on Investigations launched an inquiry into the trading loss last fall so as to determine how different divisions of the bank wound up on opposite sides of one trade. The report compiled by the committee is to drop in the next few weeks.
The people familiar with the matter have not commented on the dollar value of the opposing trades placed by JP Morgan Chase & CO’s investment bank traders, which was evidently smaller than the total positions put on by the CIO. The intra-bank trading went unmentioned in a 129-page report JP Morgan released on January 16, which chronicled some of the bank’s risk management failures throughout the London Whale fiasco. The scandal has led to a number of management changes at JP Morgan and has damaged Jamie Dimon’s image and led to a 50 percent cut in his once $23 million pay.
JP Morgan denied to comment on the investment bank’s trading positions.
One of the three people who have spoken out on the matter claimed that JP Morgan managers discussed merging the two sets of trades so as to try to offset CIO losses. Those talks ended before Bloomberg News first reported on the CIO trades on April 5 of last year, the source stated.
JPMorgan has maintained that this “never came up in our exhaustive internal investigation.”
In July, JP Morgan fired three London-based traders in the CIO most closely tied to the trading, including Bruno Iksil, dubbed the London Whale by hedge fund traders. Apparently Iksil and his boss, Javier Martin-Artajo, were worried about the investment bank’s actions in the spring of 2012, believing its traders of deliverately trying to move the market against the CIO by leaking the information on its positions to hedge funds. Iksil filed a complaint to a mamber of JPMorgan’s compliance department, according to one of the people who are familiar with the scandal.
Lawyers for Martin-Artajo and Bruno Iksil declined to comment.
“The big banks have always had a habit of pitting people in the bank against each other,” said Charles Geisst, a finance professor at Manhattan College and a former banker. “When it’s discovered it’s not taken well.”