JPMorgan may face criminal investigation says Reuters (Photo: Reuters)
JPMorgan is still being investigated for potential "criminal wrongdoing" in relation to the 'London Whale' scandal that lost the bank billions of dollars in legal, but bad, bets - even though it is about to reacheas a civil settlement with a raft of US and UK authorities.
In May 2012, Bruno Iksil, nicknamed the London Whale for his preference for huge trades, and his colleagues at the London unit of JPM's Chief Investment Office (CIO) lost $6.2bn through bad bets in a portfolio that was specifically designed to hedge the bank's risk exposure.
This prompted an investigation by several US authorities, and the bank's CEO Jamie Dimon explained to the US senate why he didn't ensure that the CIO's risk managers adequately kept pace with the nature of the unit's business.
JPM had to also restate its 2012 first-quarter earnings to reflect the huge losses. It had originally revealed only $2bn in writedowns from the scandal.
According to unnamed sources cited by Reuters, the FBI and federal prosecutors are still gathering evidence from the events that led to the restatement of its earnings.
Sources say that the investigators are looking into how much the bank knew about the potential losses or the risks before delivering its earnings statement to investors.
JPM declined to comment.
Two Former Traders Indicted
This week marks a turning point in the 'London Whale' scandal, as JPM looks to settle with a string of US and UK authorities while two former traders were indicted by a US grand jury for allegedly trying to cover up the bank's vast legal losses.
Javier Martin-Artajo and Julien Grout are accused of hiding the $6.2bn loss by marking positions in a credit derivatives portfolio at inflated prices during a certain period of time.
In August this year, Martin-Artajo, who headed up the JPM team that made a series of catastrophic trades, and Grout, who was tasked with recording and distributing daily values on the team's positions, were charged with four counts of breaking US Federal law, including wire fraud, falsifying books and records, making false filings with a US regulator, and conspiracy.
According to the indictment, Martin-Artajo and Grout cooked the books from March to May of 2012 by artificially inflating the value of securities "to hide the true extent of significant losses" incurred by the 'London Whale' trading scandal.
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