One of the biggest investment banks in the world, JP Morgan Chase, has just admitted to violating US federal securities laws in their “London Whale” trades and will consequently be paying four regulators $920m.
The “London Whale” trades became one of the biggest trading scandals in history. Traders in the firm’s Chief Investment Office in London made massive bets on derivatives trades and, then covered up their losses.
One of the traders, Bruno Iksil, received the nickname “the London Whale” because of the size of his trades. Despite being involved in the crime, Iksil will not be prosecuted, because he cooperated with American authorities.
The U.S. Securities and Exchange Commission (SEC) said that JP Morgan failed to properly implement adequate internal controls.
George Canellos, co-director of the SEC’s division of enforcement, said:
“JP Morgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses.”
The huge settlement includes a £137.6m ($219 m) fine from the Financial Conduct Authority – the second biggest penalty made by UK financial authorities. A further $300m will be paid to the the US Office of the Comptroller of the Currency (OCC) and $200m will be paid to both the SEC and the US Federal Reserve.
The failings have undermined trust and confidence in the UK’s financial markets, according to Tracey McDermott, the FCA’s director of enforcement and financial crime. She said that “this is yet another example of a firm failing to get a proper grip on the risks its business poses to the market.”
James Dimon, Director of JP Morgan Chase since 2004, said in a statement:
“We have learned from and worked to fix them. We will continue to strive towards being considered the best bank – across all measures – not only by our shareholders and customers, but also by our regulators.”
Not the first time JP Morgan agrees to pay
The settlement comes following other major lawsuits made against them too, including:
Having to pay over $50 million to Russian billionaire Leonard Blavatnik for placing risky subprime mortgage securities in an investment account he held.
Agreeing to pay $410 million to settle charges from the Federal Energy Regulatory Commission (FERC) for manipulating energy markets.