The U.S. Department of Justice is in the advanced stages of an investigation into whether former traders in JPMorgan Chase's chief investment office in London engaged in criminal misconduct in the marking of credit positions last year, according to someone familiar with the matter.
The Justice Department probe centers on whether a handful of individual traders deliberately mismarked certain complex credit positions in an effort to mask the growing losses in a key CIO portfolio during the spring of 2012, according to this person. That portfolio, whose positions in complex corporate-credit securities eventually went badly awry, costing the bank more than $6 billion, eventually took on the nickname "London Whale" because of its geographic origin and size.
In the footnotes of a Feb. 28 filing, JPMorgan acknowledged that the Justice Department and other government agencies were looking in to "losses in the synthetic credit portfolio" managed by the CIO. JPMorgan, the filing stated, "has received requests for documents and information" from the Justice Department, among other entities, in connection with those losses. Reached Friday, a spokesman for the DOJ had no immediate comment on the matter.
The details of the London Whale trades and the way in which they were marked by traders were subjected to scrutiny at a Congressional gathering in Washington last week. During a six-hour hearing, Sen. Carl Levin and others accused JPMorgan of mismarking its books, hiding losses, and misleading the public about the size and nature of the losses at various times. Current and former JPMorgan executives, including former chief investment officer Ina Drew, defended their behavior, while acknowledging that mistakes had been made by traders and risk managers in the CIO group.
Source: CNBC | Kate Kelly