U.S. authorities may arrest two former JP Morgan Chase employees in connection with their alleged role in hiding $6.2 billion in losses in what became known as the “London Whale” scandal, two people familiar with the situation say.
The main target is Javier Martin-Artajo, the former direct supervisor of Bruno Iksil, the second target. Iksil is the trader who became known as the “London Whale” after his reputation for making outsize bets in a “thinly traded derivatives market,” the sources say. The U.S. is also eyeing Julien Grout, Iksil’s junior trader, the two people contend.
Both sources spoke anonymously, as the investigation is ongoing.
JPMorgan had to scramble to unwind Iksil’s derivatives positions after they came to light in April 2012, leading to the massive loss. The loss highlighted the scale of the bank’s risk-taking activities and sparked public outrage. Critics said JP Morgan should not have been able to engage in such risky behavior while it engaged in commercial banking.
Iksil and his team were employees of the bank’s chief investment office, a group of traders and strategists whose mandate to earn money through bets on exotic products increased after the 2008 financial crisis. Martin-Artajo’s boss, Achilles Macris, the chief investment officer for Europe and Asia, earned billions for the investment office, buying cut-price mortgage-backed securities in the immediate aftermath of the crisis.
The trading losses also sparked civil and criminal investigations, and led to multiple Congressional hearings. Around a dozen of the bank’s employees changed jobs and several, including chief investment officer Ina Drew, left the firm. JP Morgan’s board cut Dimon’s 2012 bonus and a shareholder movement to strip Dimon of his dual role as chairman of the board drew some support, though it ultimately failed. Two JP Morgan directors left earlier this year.