London Whale: JPMorgan Fined Almost $1bn Over Trading Scandal

JPMorgan has been fined $920m by US and UK financial regulators over the London Whale trading scandal that has cost the bank billions of dollars in losses.

The UK's Financial Conduct Authority (FCA) said JPMorgan's bad conduct over the London Whale scandal, in which the bank's trader Bruno Iksil lost $6.2bn (£3.85bn, €4.57bn) in a serious of enormous bets, went from portfolio level up to senior management. It fined JPMorgan £137.6m.

US regulators have also fined JPMorgan $700m over the same scandal, which has seen two of its former staff members indicted on fraud charges amid allegations they attempted to mask part of the huge loss. Iksil has not been arrested over the trades, which were legal.

The bank was fined $200m by the US Securities and Exchange Commission, $300m by the Office of the Comptroller of the Currency, and another $200m by the Federal Reserve. It takes JPMorgan's total fine to $920m.

JPMorgan's UK fine could have been as much as £196.58m, but the bank agreed to an early settlement and so received a 30% discount on the penalty.

"When the scale of the problems at JPMorgan became apparent, it sent a shock-wave through the markets," said Tracey McDermott, the FCA's director of enforcement and financial crime.

"We consider JPMorgan's failings to be extremely serious such as to undermine the trust and confidence in UK financial markets.

"This is yet another example of a firm failing to get a proper grip on the risks its business poses to the market. There were basic failings in the operation of fundamental controls over a high risk part of the business.

"Senior management failed to respond properly to warning signals that there were problems in the CIO. As things began to go wrong, the firm didn't wake up quickly enough to the size and the scale of the problems.

"What is worse, they compounded this by failing to be open and co-operative with us as their regulator."

She added: "Firms must learn the lessons from this incident and ensure that they have business practices, values and culture to control the risks in their businesses."

The bank said it had co-operated with regulators throughout their investigations.

"We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them," said JPMorgan's Dimon.

"We will continue to strive towards being considered the best bank - across all measures - not only by our shareholders and customers, but also by our regulators.

"Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better company."

In May 2012, Iksil, nicknamed the London Whale for his preference for huge trades, and his colleagues at the London unit of JPM's Chief Investment Office (CIO) lost $6.2bn through bad bets in a portfolio that was specifically designed to hedge the bank's risk exposure.

This prompted an investigation by several US authorities and the bank's CEO Jamie Dimon was hauled in front of the US senate to explain what happened.

JPMorgan had to also restate its 2012 first-quarter earnings to reflect the huge losses. It had originally revealed only $2bn in writedowns from the scandal.

London Whale arrests

The two arrested former JPMorgan traders are Javier Martin-Artajo and Julien Grout.

The pair are accused of hiding the $6.2bn loss by marking positions in a credit derivatives portfolio at inflated prices.

In August, Martin-Artajo, who headed up the JPM team that made a series of catastrophic trades, and Grout, who was tasked with recording and distributing daily values on the team's positions, were charged with four counts of breaking US Federal law, including wire fraud, falsifying books and records, making false filings with a US regulator, and conspiracy.

According to the indictment, Martin-Artajo and Grout cooked the books from March to May of 2012 by artificially inflating the value of securities "to hide the true extent of significant losses" incurred by the 'London Whale' trading scandal.