New York Securities Lawyer Blog
JPMorgan Chase & Co. (“JPMorgan”) filed a lawsuit in a London court last week against Javier Martin-Artajo (“Martin-Artajo”), a former executive in JPMorgan’s chief investment office. Martin-Artajo was the direct supervisor of Bruno Iksil (“Iksil”), also known as the London Whale, the former JPMorgan trader alleged to have caused JPMorgan to incur multibillion-dollar trading loss as a result of a complex and oversized wager on credit derivatives during the summer of 2012. See JP Morgan Chase & Co v. Mr Javier Martin-Artajo, High Court of Justice, Queen’s Bench Division, HQ12X04391 (Oct. 22, 2012). Initially, the losses were approximately $2 billion but have since increased to an estimated $6.2 billion. After discovering the gravity of these losses, Michael J. Cavanagh, JPMorgan’s former Chief Financial Officer and current head of Treasury Services & Securities Services and Clearing, initiated an internal investigation, which uncovered a number of recordings, emails and other documents that suggest Martin-Artajo actually encouraged Iksil in to purchasing more risky, but potentially profitable higher-yielding assets, such as structured credit, equities and derivatives. Likewise, the investigators believe that the traders likely hid the losses during the first three (3) quarters of 2012 by improperly valuing the positions as losses mounted. Cavanagh noted in a conference held with JPMorgan last July that the improper valuation created losses in JPMorgan’s portfolio of credit derivatives that appeared smaller than they actually were. JPMorgan requires its traders to mark their positions daily so that the firm can track its profits, losses and risk. An internal control group “double-checks” these marks on a monthly and quarterly basis against market prices. Even though this rigorous process is an attempt by management to deter its traders or trading desk from rigging prices, the bank’s $6.2 billion loss confirms the need for a stricter regulatory scheme. In addition to the internal investigated conducted by JPMorgan, Martin-Artajo and Iksil have also been subjects of investigations by criminal and civil authorities, such as the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve. Although this loss has been devastating, JPMorgan, during its latest earnings call, confirmed that it had contained the losses by closing out the position and moving the remainder of the credit derivative trade to the investment bank. If you have suffered losses from investments with JPMorgan Chase & Co., or any other investment adviser firm or brokerage firm, and believe that you are a victim of sales practice abuses, please contact Lax & Neville LLP for a consultation at (212) 696-1999. Our firm has extensive experience and knowledge representing victims of investment fraud nationwide.