JPMorgan Chase

US indicts ex-traders in JPMorgan ’London Whale’ scandal

PUBLISHED : Tuesday, 17 September, 2013, 11:29am
UPDATED : Tuesday, 17 September, 2013, 11:29am

A US grand jury has indicted two former JPMorgan Chase traders at the centre of the bank’s “London Whale” scandal, court papers made public on Monday show.

Javier Martin-Artajo and Julien Grout were accused of hiding hundreds of millions of dollars of losses within JPMorgan’s chief investment office in London by marking positions in a credit derivatives portfolio at inflated prices.

Those losses were part of an overall US$6.2 billion trading loss suffered by the bank centreed on Bruno Iksil, the former trader known as the London Whale. Martin-Artajo supervised Iksil, while Grout worked for Iksil.

According to the indictment, Martin-Artajo and Grout from March to May of last year artificially inflated the value of securities “to hide the true extent of significant losses” in a trading portfolio.

The indictment said both men did this to enhance their prospects for promotions and bonuses, while Martin-Artajo hoped to stop JPMorgan from moving the trading portfolio to another division, and Grout wanted to curry favour with his supervisor.

Martin-Artajo and Grout were each charged by the grand jury with five criminal counts, including securities fraud, wire fraud, conspiracy, making false filings with the US Securities and Exchange Commission and falsifying books and records.

The government wants the men to forfeit proceeds traceable to their alleged offenses, including compensation from the largest US bank. The case was assigned to US District Judge Lorna Schofield in Manhattan.

JPMorgan is not a defendant in the criminal case, but is nearing civil settlements with US and European regulators that could result a US$700 million payment, a person familiar with the matter said on Monday.

Richard Smith, a lawyer for Martin-Artajo, did not immediately respond to requests for comment. Edward Little, a lawyer for Grout, had no comment.

Julie Bolcer, a spokeswoman for US Attorney Preet Bharara in Manhattan, declined to comment. JPMorgan spokesman Brian Marchiony declined to comment.

Iksil has not been criminally charged, and has been cooperating with US authorities.

US prosecutors charged Martin-Artajo and Grout last month. Grout sought to avert a formal indictment by portraying himself as an unwitting victim of manipulation by superiors, a person familiar with the matter said last week.

Authorities in the United States needed an indictment against Martin-Artajo to proceed with his extradition from Spain, where he was arrested and released in August. Martin-Artajo is Spanish, while Grout is French.