A team of high-stakes traders, including one dubbed the London Whale, were today at the centre of an investigation over £1.2 billion losses at America's biggest bank.
The team at JP Morgan Chase had taken bets in financial markets that were designed to protect the bank by hedging against its other investments, but the strategy dramatically backfired, losing two billion US dollars in the past six weeks.
The revelation hit banking shares across the world today and heightened calls for more regulation in the UK, where it is understood the majority of the traders are based.
The London Whale, who gained the nickname because of the size of the positions he took, has been widely reported to be French-born Bruno Iksil.
He is understood to be one of the best paid traders in the City and commutes to London from Paris on a weekly basis.
Insiders at JP Morgan Chase stressed that he is not a rogue trader, but one of a team whose strategy went wrong.
The trading loss is an embarrassment for the bank that came through the 2008 financial crisis in much better health than its peers, steering clear of risky investments that hurt many other banks.
Chief executive Jamie Dimon said: "The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought.
"There were many errors, sloppiness and bad judgment."
It was reported in April that a single trader, known as the London Whale, was making such large trades that he was moving prices in the 10 trillion-dollar market.
Mr Dimon said the losses were "somewhat related" to that story, but seemed to suggest that the problem was broader. Mr Dimon also said the company had "acted too defensively" and should have looked into the division more closely.
Michael Hewson, senior market analyst at CMC Markets, said: "The loss is seen as a major surprise given the bank was seen by many as one of the few banks to come out of the financial crisis with some semblance of financial credibility.
"This has sent banking shares sharply lower, led by Barclays, as markets once again fret about the risks banks across the sector take in looking to generate revenue.
"The main concern is if something like this can affect JP Morgan, how vulnerable is the rest of the sector?"
Shares in JP Morgan Chase were down 7% today. In London, shares in Barclays were down 2%, while HSBC and Royal Bank of Scotland were also lower.