Authorities in the United States and Britain are set to hand down roughly $750 million in fines against JPMorgan Chase over the bank’s disastrous “London Whale” trading losses last year, according to people familiar with the negotiations.
The settlements could be announced as soon as this week, said the people who were not authorized to speak publicly because the settlements have not been finalized. It would resolve a majority of the investigations that were launched after JPMorgan revealed that its traders in London placed bad bets on credit derivatives that resulted in billions of dollars in losses.
The bank may make a rare declaration of wrongdoing in its agreement with the Securities and Exchange Commission, which recently introduced a policy demanding admissions of misconduct in certain types of civil settlements, according to a person familiar with the negotiations.
The Office of the Comptroller of the Currency, the Federal Reserve and Britain’s Financial Conduct Authority have negotiated separate settlements with the bank, the people said.
While SEC Commissioner Mary Jo White has aggressively pushed for an admission of wrongdoing in some civil cases, she did not take part in the JPMorgan deal, people familiar with the case said.
Federal policy prohibits White and the SEC’s co-director of enforcement, Andrew Ceresney, from weighing in because both had represented JPMorgan in the past year, when they were partners at the law firm of Debevoise & Plimpton in New York.
Officials at the agencies and JPMorgan declined to comment for this article.
For JPMorgan, the settlements will help put to rest months of upheaval at the bank that included the departure of senior executives and criminal charges against traders. The lead trader, Bruno Iskil, who was dubbed the London Whale because of his outsized bets, was not charged, although two of his colleagues were.
The former traders — Javier Martin-Artajo and Julien Grout — were indicted by a federal grand jury in Manhattan, Reuters reported, citing court papers made public Monday. The Justice Department and the Commodity Futures Trading Commission also are investigating the trading blunder, according to a public filing.
The revelation in May 2012 that JPMorgan traders lost billions of dollars on risky trades set off a firestorm that resulted in congressional hearings and regulatory probes. It was an embarrassing episode for a bank that prides itself as one of the best-managed firms in the industry.
JPMorgan chief executive Jamie Dimon has been contrite about the trading blunder, calling it “the stupidest and most embarrassing situation I have ever been a part of” in his annual letter to shareholders this year. He also called it “a real kick in the teeth” and one of the ways in which the bank has “let our regulators down.”
But days after the losses jumped to more than $1 billion, Dimon dismissed concerns about the trades as a “tempest in a teapot.” The trades ultimately cost the bank about $6.2 billion.
A Senate report released in March suggested that Dimon and his team were less than forthright with regulators about the mounting losses. The report accused the bank of hiding losses for three months last year, overstating the value of its trading positions and ignoring red flags. JPMorgan, according to the report, withheld information about the nature of the trading portfolio when regulators made inquiries.
At one point, the bank was providing regulators daily profit and loss statements from its investment division so they could see what was going on. But Dimon put a stop to it. When one of his subordinates resumed the updates, “Dimon reportedly raised his voice in anger,” the Senate report said.
Dimon has admitted that the bank failed to manage its risks, allowing the bad trades to persist, but the outspoken chief executive has not professed any knowledge of traders concealing the losses.
Almost every corner of JPMorgan’s business is under scrutiny from state, federal and international authorities. Regulators are investigating the way the bank recouped credit card debts from delinquent borrowers, how it marketed mortgage-backed securities and whether it turned a blind eye to Bernard Madoff’s Ponzi scheme.
As a result of these cases, JPMorgan said it anticipates $6.8 billion in future legal costs in excess of the money it has already set aside to handle litigation. That is larger than the amount that other banks have added to their reserves, according to a recent analysis from Barclays Research.