This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Ex-JPMorgan Traders Could Face 20 Years in Prison (Update 1)

Updated from 10:23 a.m. EDT with comments from CEO Jamie Dimon's memo to employees

NEW YORK ( TheStreet) -- Two former JPMorgan Chase (JPM - Get Report) traders have been indicted for allegedly engaging in securities fraud in hiding trading losses from a botched derivative trade last year.

A federal court in Manhattan named Javier Martin-Artajo, who oversaw trading strategy for the synthetic portfolio at the bank's chief investment office in London, and Julien Grout, a trader who worked for him, in the indictment, according to Bloomberg.

The Department of Justice filed criminal charges against the traders in August. The charges included four counts of conspiracy, wire fraud, falsification of records and falsification of filings with the Securities and Exchange Commission. The indictment unsealed Monday added a fifth charge -- securities fraud -- which carries a maximum prison sentence of 20 years.

Bruno Iksil, the man behind the infamous "London Whale" trades, has not been charged in return for his cooperation.

The Justice Department intends to show that the two traders named in the indictment along with other un-named co-conspirators artificially inflated the value of the securities and hid the true nature of the losses from senior management.

Artajo and Grout, who live in Europe, have not surrendered themselves to the U.S. authorities.

JPMorgan has not been criminally accused of wrongdoing. The bank, however, is facing multiple regulatory inquiries related to the trading losses.

It is expected to shortly announce a settlement with multiple regulators that could exceed $700 million. The SEC may require the bank to admit that it had inadequate controls and failed to adequately supervise the traders.

Chief Financial Officer Marianne Lake has said legal losses in the third quarter could top $1.5 billion, in the wake of a crescendo of legal lawsuits filed recently against the bank on a range of alleged violations.

In a letter to employees Tuesday, CEO Jamie Dimon warned that there could be more legal woes ahead in the next few weeks but said compliance was the No. 1 priority for the entire bank.

"If you don't acknowledge mistakes, you can't fix them and learn from them. So now, as in the past, we are recognizing our problems, rolling up our sleeves and fixing them," he wrote.

JPMorgan has added 4,000 people to its control efforts (3,000 in 2013 alone) and has spent $1 billion on compliance efforts.

It has increased spending in technology in the regulatory and control space by 27% in 2011.

The bank is exiting non-core businesses including student lending and the physical commodities sales and trading businesses.

In addition, the bank is also focusing on "building and open and more transparent relationship with regulators," the CEO said.

"Never before have we focused so much time, effort, brainpower, technological power and money on a single, enterprise-wide objective. Make no mistake -- we are going to get this right," he wrote.

Shares of JPMorgan were down 0.1% at $53.06 Tuesday afternoon.

Analysts have remained positive in their outlook for the bank, maintaining that valuations remain cheap despite the litigation risk.

RELATED STORIES:


-- Written by Shanthi Bharatwaj New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
JPM $68.53 0.00%
AAPL $121.30 0.00%
FB $94.01 0.00%
GOOG $625.61 0.00%
TSLA $266.15 0.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs