Bruno Iksil achieved Wall Street notoriety with one of the worst trades in history. He lost $6.2 billion — more than three times the yearly budget of the Securities and Exchange Commission — placing risky bets on complex financial instruments while working for JPMorgan Chase.
Iksil’s big losses earned him the nickname the “London Whale,” and set off an intense investigation into the way JPMorgan handles such sophisticated trades. The bank ultimately paid $920 million in fines to U.S. and British regulators, and its chief executive, Jamie Dimon, offered several humbling apologies for the episode.
But five years later, Iksil, who is reportedly living with his family in France, has yet to be tried. After striking a deal with federal prosecutors to avoid criminal prosecution more than three years ago, the Wall Street Journal reported this week that the Federal Reserve is backing off plans to file a complaint against Iksil.
The case is turning into the latest example of how U.S. regulators and prosecutors struggle to hold individuals responsible for corporate wrongdoing. Facing criticism of its record on prosecuting white collar crime, the Obama administration in 2015 announced that it would pursue more cases against individual company executives, not just corporations. Sally Yates, deputy U.S. attorney general at the time, called the policy “one of the most important documents within the Justice Department community.”
But it remains unclear how the Trump administration plans to proceed with such cases. One test, said some legal experts, could come from the Justice Department’s handling of Wells Fargo’s admission last year that it had fired 5,300 employees over a five-year period for opening bank accounts that customers didn’t authorize. The bank announced this week that it would strip an additional $75 million in compensation from two senior executives, including former chief executive John Stumpf, after an internal investigation found the abusive sales practices were going on much longer than initially disclosed.
“The Wells Fargo case may be an early test of this administration’s resolve to hold corporations responsible for crimes,” said Brandon L. Garrett, a professor at the University of Virginia School of Law. “They have said they don’t want to regulate businesses and banks, and that doesn’t bode well for corporate crime enforcement.”
While not addressing any case in particular, Attorney General Jeff Sessions has “noted the importance of individual responsibility,” Trevor McFadden, the deputy assistant attorney general in the Justice Department’s criminal division, said in a February speech.
“Indeed, our partnerships with foreign authorities are increasingly allowing us to ensure that even individuals living abroad are held accountable for their actions,” he said.
Finding individuals to prosecute in the London Whale case has been particularly difficult. Iksil assembled a huge portfolio of investments designed to hedge JPMorgan against other risky bets the bank was making. But in 2012, Iksil’s quasi-insurance policies started to cost the bank money. Initially, JPMorgan estimated the losses from Iksil’s trade would amount to $2 billion, but eventually the firm disclosed the figure was even bigger — $6.2 billion.
Regulators and lawmakers pummeled the bank and accused Dimon of being less than forthright with regulators as he learned about the botched trades. (Dimon initially dismissed the incident as a “tempest in a teapot,” but as the losses grew, he called it “the stupidest and most embarrassing situation I have ever been a part of.”)
As prosecutors began to build cases against the bank, the U.S. attorney for Manhattan announced in 2013 that the office had entered into a “nonprosecution agreement” with Iskil for cooperating with prosecutors.
“Although I don’t think you could call him blameless, he did sound the alarm more than once,” former U.S. attorney Preet Bharara said at the time.
In 2015, Britain's Financial Conduct Authority announced it was dropping its investigation into Iksil. Now, it appears the Federal Reserve, which declined to comment, may not be filing charges either.
In letters to several media outlets, including Bloomberg News, Iksil said he was not to blame for the episode. Iksil said he warned his superiors about the potentially huge losses, but was instructed to carry out the trades anyway.
The government’s decision to not prosecute shows that he is not culpable, Iksil wrote. “Publicity surrounding the losses sustained by . . . JPMorgan typically refers to ‘the London Whale’ in terms that imply that one person was responsible for the trades at issue,” he said. “In fact the losses . . . were not the actions of one person acting in an unauthorized manner. My role was to execute a trading strategy that had been initiated, approved, mandated and monitored by . . . senior management.”
Iksil’s attorney could not be immediately reached for comment.
Two of Iksil’s colleagues, Javier Martin-Artajo and Julien Grout were charged with wire fraud and other offenses. But their cases have yet to go to court. Spain has reportedly refused to extradite Martin-Artajo, a Spanish national, and Grout, who is from France, has also not returned to the United States. The Department of Justice declined to comment on the issue.
Grout’s attorney, Edward Little, has complained about the deal Iksil struck to avoid prosecution, calling it “astonishing.”
“The government’s strategy — letting Iksil escape responsibility in exchange for incriminating Mr. Grout — exposes the weakness of the charges and can only be explained by the political pressure put on the Department of Justice to bring a criminal case in the ‘London Whale’ affair,” Little said in a 2013 statement.