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article imageLondon Whale scandal: JPMorgan Chase accused over $6 billion loss

By Eko Armunanto     Mar 16, 2013 in Business
John McCain, the senior Republican on the US Senate panel investigating the affair, said JPMorgan Chase had misled investors before lying to investigators about its $6 billion trading losses.
CEO Jamie Dimon is the person responsible for hiding federal regulators' reports in May saying the bank had accumulated billions of dollars in trading losses, said the firm’s former chief financial officer Douglas Braunstein in Congressional testimony on Friday.
Douglas Braunstein, who is now Vice Chairman at the bank, said Dimon did not submit the daily reports for two weeks because he was concerned about confidentiality. Jamie Dimon ultimately acknowledged later that month that the firm had lost $2 billion on risky trades out of its London office. The losses have since been revised to more than $6 billion.
Responding to the allegation, the bank said: "While we have repeatedly acknowledged mistakes, our senior management acted in good faith." JP Morgan added that the management never had any intent to mislead anyone.
McCain’s allegation came on Thursday as the Senate sub-committee published its bipartisan findings into the trading, risk management failures and subsequent disclosures that marked last year’s high-risk trading, the so-called “London Whale” in which Braunstein told investors, back in April 2012, that derivatives trades executed by the bank's chief investment office were "long-term, transparent to regulators, had been approved by the bank's risk managers, and served a hedging function that lowered risk" and would be permitted under the Volcker Rule. None of those statements were true, according to the Senate Committee's 300-page report entitled, "JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses."
The report describes Braunstein's testimony, including that regulators were given “information on those positions on a regular and recurring basis”, as “inaccurate at best, and deceptive at worst”. When the losses were first revealed on May 10, CEO Jamie Dimon pegged them at around $2 billion but said they could move higher. "The testimony is likely to revive the debate on whether banks are 'too big to fail, manage or jail'. Banks must not expect taxpayers to bail them out if their bets don't pan out," said Senator McCain.
The scandal came to be known as the London Whale trades due to the size of the transactions. The trader responsible for the loss-making positions, Bruno Iksil, subsequently lost his job. Bruno Iksil was then nick-named "The London Whale" as he was so powerful and so bullish in early 2012 that his trades alone may have moved the index. He was stripped of his trading responsibilities right after the disastrous $2 billion trading loss related to derivatives in the bank's chief investment office in London became known in May 2012.
More about jp morgan, Trading, Fraud, london whale
 
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