The London Whale is proving to be as destructive and relentless as Moby Dick.
JPMorgan Chase revealed yesterday that traders in its Chief Investment Office may have tried to hide their money-losing positions as their massive “Whale” bets turned against the bank.
JPMorgan boss Jamie Dimon now estimates that the CIO in London, a once obscure division that was supposed to hedge against risk, racked up $5.8 billion in losses on wrong-way bets — nearly triple the original $2 billion estimate in May.
The bank did not identify which traders may have been involved in a possible cover-up. But JPMorgan confirmed that several figures at the center of the fiasco — including trader Bruno Iksil, nicknamed the “London Whale” because of the size and nature of the bets, as well as his superiors, Achilles Macris and Javier Martin-Artajo — had been dismissed.
JPMorgan said the traders along with Ina Drew, the former head of the CIO unit, could see two years of compensation clawed back due to the losses.
Sources said the bank, which has spent weeks interviewing traders, poring over millions of e-mails and listening to voice mails, determined that it wasn’t comfortable with the “marks,” or values the traders assigned to the assets linked to the complex trading positions.
“They appeared to be on the aggressive side,” said one insider, noting that it’s difficult to determine the “intent” of the traders.
The admission that traders may have lied was another blow to Dimon’s badly bruised reputation as he tries to put the trading mess behind him. Regulators are expected to use JPMorgan’s internal research to determine if there are grounds for criminal charges. The bank is already under scrutiny from the Securities and Exchange Commission, the Justice Department and other agencies.
The trading losses forced the bank to restate its first-quarter results to record a loss of $459 million, reflecting $1.4 billion in CIO losses. That was on top of the $4.4 billion trading hit in the second-quarter, bringing total “Whale” losses to $5.8 billion.
JPMorgan hosted an unusual meeting at its Park Avenue HQ to discuss its latest results rather than the customary conference call. During the meeting, Dimon tried to tamp down concerns he had lost his grip on the firm, calling it an “isolated” incident that had shaken the bank to its core.
“Have you lost a step? Has the focus gone off?” asked outspoken analyst Michael Mayo of CLSA.
“Mike, this company is the same company that went through ’06, ’07, ’08, ’09, 2010, 2011,” Dimon said. At some point, I’d like people to actually focus on the underlying businesses … that’s why we are here.”