JPMorgan duo facing 'London Whale' charges

US prosecutors target former traders at London-based unit that racked up huge losses

The investigation into the botched “London Whale” trades that saddled JP Morgan with billions of dollars in losses took a new turn yesterday after prosecutors in the US filed criminal charges against two of the bank’s former traders who worked at the London-based unit at the centre of the affair.

Javier Martin-Artajo was a managing director at the bank and senior trader at its chief investment office (CIO), the division where the losses occurred, while Julien Grout was a junior trader in the same unit. Both are facing charges of conspiracy to falsify books and records, to commit wire fraud and to falsify filings with the US Securities and Exchange Commission.

They worked with Bruno Iksil, the trader who made the ill-fated trades, and who became known in the markets as “London Whale” for the massive bets.

Mr Iksil is cooperating with authorities and has not been charged. Government lawyers have entered into a non-prosecution agreement with Mr Iksil.

The botched derivatives trades left JP Morgan with losses in excess of $6bn, putting the bank and its high-profile chief executive, Jamie Dimon, under a harsh spotlight as questions were raised about the lender’s management and oversight practices. The trades also led to the departure of one of Mr Dimon’s closest deputies, Ina Drew, who was the bank’s chief investment officer when the losses occurred.

JP Morgan is currently believed to be in talks with the SEC about a possible settlement with the watchdog as it looks into the circumstances of the loss. Recent reports in the US suggest that the SEC is seeking an admission of wrongdoing from the bank, which is America’s largest in terms of assets.

Announcing the charges against Mr Martin-Artajo and Mr Grout yesterday, the US Attorney for the Southern District of New York, Preet Bharara said the Whale affair was not simply “a tempest in a teapot, but rather a perfect storm of individual misconduct and inadequate internal controls.”

The attention now is on efforts to bring the accused individuals to court in the US. Earlier this year, Mr Grout moved back from London to his native France, while Mr Martin-Artajo, who is currently on vacation, is based in the UK.

The former case is likely to prove the trickiest, as France usually shields its citizens from extradition. Mr Grout’s lawyer, Edward Little, has previously said that his client moved to France for personal reasons after failing to find employment in the London, not because he was anticipating any charges, and was in the US on vacation as recently as last month. Mr Little did not immediately respond to a request for comment yesterday. According to Reuters, Mr Grout is residing at his parents holiday home in the small French village of Sarrazac.

In London, Mr Martin-Artajo lawyers at Norton Rose Fulbright said he was “currently on a long planned vacation and will be returning to the UK as scheduled.” “Mr. Martin-Artajo is confident that... he will be cleared of any wrongdoing,” they added in a statement.