UK watchdog drops case against ‘London whale’
A view of US banking giant JP Morgan's offices in Canary Wharf are pictured in London, on May 11, 2012. US banking giant JPMorgan Chase said Thursday it had lost $2 billion on derivatives since March in what chief executive Jamie Dimon called a "flawed" and "poorly executed" hedging operation. In a unscheduled conference call, Dimon also said the bank could face another $1 billion in losses through the end of June due to market volatility. AFP PHOTO/CARL COURT©AFP
The UK financial watchdog has dropped its investigation of Bruno Iksil, the former JPMorgan trader known as the “London Whale” whose trades led to $6.2bn in losses, clearing him in the three-year probe.
The Financial Conduct Authority’s enforcement division sought to bring a civil action against Mr Iksil for failing to prevent or detect mismarking within JPMorgan’s chief investment office.
But its internal panel of independent experts, the Regulatory Decisions Committee, ruled that the watchdog did not have a strong enough case to proceed.
“We can confirm that the FCA will not be taking any further action,” the authority said.
Mr Iksil, who lives in France, has already avoided criminal charges in the US by striking an immunity deal with prosecutors there in exchange for his co-operation.
His lawyer, Michael Potts, at Byrne and Partners, said: “It is rare for the RDC to dismiss an FCA enforcement case at this very initial stage of the disciplinary process. Mr Iksil has fully co-operated throughout the FCA investigation and will continue to co-operate as a witness in the ongoing criminal and civil proceedings in the USA.”
Julien Grout, a junior derivatives trader on the desk, and Mr Iksil’s former boss, Javier Martin-Artajo, who was a managing director at the bank, are both being prosecuted in the US for their roles in the affair. They deny wrongdoing. The FCA is not seeking to bring a case against either man.
The only person still being investigated by UK authorities in connection with the 2011 losses is Achilles Macris, who ran the London office of the bank’s chief investment office and oversaw its synthetic credit portfolio team. It was in that division where trades in credit derivatives ultimately led to the trading losses in 2012.
JPMorgan was fined $920m by four US and UK regulators and its management was found to have withheld information from its audit committee, including the fact that it had hired an outside law firm to examine “significant control issues” surrounding the disclosure and valuation of credit derivatives. The bank declined to comment on the FCA decision.
London-based executives in the CIO “deliberately misled” regulators examining the derivatives positions, “deliberately reassuring” officials that they were “simply” adjusting a hedging position while internally admitting to being “in crisis mode” over mounting losses, the regulators found.
In April, a Spanish court rejected the US’s request to extradite Mr Martin-Artajo, who has been charged with wire fraud in connection with the scandal. Spain’s national court in Madrid ruled that US authorities had no jurisdiction over him. He is accused of helping to hide hundreds of millions of dollars in trading losses.
Macris won a challenge against the FCA at the UK Court of Appeal in May. The court found the watchdog had improperly identified him in its report when it fined the New York-based bank £138m as part of the broader settlement.