Two Charged in J.P. Morgan 'Whale' Trades (Hiding 6 Billion In Losses)
Two Charged in J.P. Morgan 'Whale' Trades
Prosecutors Allege Colleagues of Trader Attempted to Hide Losses; Trader Himself Isn't Charged
http://online.wsj.com/article/SB10001424127887324823804579012550859130222.html
U.S. prosecutors announced criminal charges against two former J.P. Morgan Chase JPM -0.26% & Co. traders who were accused of hiding losses on runaway bad bets that cost the bank more than $6 billion.
The charges are the U.S. government's most aggressive move yet to hold someone responsible for the mess named after the "London whale," who engineered the bets and worked closely with the two former J.P. Morgan traders—though he avoided prosecution and helped investigators build a case against them.
J.P. Morgan also wasn't charged, but government officials sharply criticized its risk-management procedures, and details that emerged Wednesday might give federal investigators more ammunition in their continuing probes of the bank's supervision of its own employees, people familiar with the matter said.
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According to the criminal complaint, traders in the London outpost of the Chief Investment Office, where the disastrous trades were made, were policed by "essentially a single employee" who "applied unreasonably wide thresholds" when reviewing valuations put on bets by the bank's traders. The alleged failures violated generally accepted accounting procedures and J.P. Morgan's internal policies, the government said.
The group charged with overseeing the values traders placed on their own positions was "neither independent nor rigorous," prosecutors concluded. The criminal charges were filed secretly last week and unsealed Wednesday.
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