Last April, a trader at JPMorgan Chase's London branch made a series of "grievous" trades that ended up costing the bank, oh, over $6 billion. A top executive resigned over it and there's been a lot of hand-wringing about it. Now the investment bank has agreed to pay nearly $1 billion as a fine for its naughty deeds.
The Wall Street Journal reports, "The U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve and the U.K.'s Financial Conduct Authority charged the company civilly with poor controls surrounding the giant bet, which ultimately cost the company more than $6 billion. The announcement of the settlements, which had been expected, marks one of the largest fines a bank has had to pay over a single trading strategy."
The WSJ adds, "In an unusual step that reflects regulators' recent push to hold Wall Street firms more accountable, J.P. Morgan admitted wrongdoing as part of the settlement, acknowledging poor internal controls." So it took a colossally unsuccessful hedge fund-type move AND two governments to get JPMorgan to admit it screwed up. (Firms usually don't admit wrongdoing.)
What happened? Well, as The Explainer explained, "A JP Morgan trader, Bruno Iksil, [accumulated] a giant bet on U.S. corporate bonds. He used derivatives to do it, and he messed up the bet and lost $2 billion for the bank. He could end up losing $1 billion more if the market doesn't cooperate." Then he and others tried to hide the losses. Many executives knew about it, but Iksil managed to avoid criminal charges by testifying against colleagues/scapegoats Javier Martin-Artajo and Julien Grout, who were charged with criminal wire fraud, falsifying bank records, and contributing to false regulatory claims.
The SEC's co-director of enforcement George Canellos said in a statement today, "While grappling with how to fix its internal control breakdowns, JPMorgan’s senior management broke a cardinal rule of corporate governance and deprived its board of critical information."