JPMorgan Lied To Fed, Did Not Report Losing Trades Whistleblower Charges

Tyler Durden's picture

Long before Virtu was forced to pull its IPO due to the backlash against HFT frontrunners in party due to being stupid enough to post its perfect trading record of 1 trading day loss in 5 years which could only be the result of a grossly rigged market, we pointed out that another entity, one having little in common with your garden variety HFT parastie, namely JPMorgan, had a 2013 trading record which could be summed up on one word only: perfection.

Yet while one could simply attribute the same kind of market rigging to JPM as one can (and should) to the average hi-freak, it seems there may be more here than meets the eye so used to seeing manipulation everywhere it looks.

According to Australia's Sydney Morning Herald, "a technical support person who worked for JP Morgan in Australia claims the bank regularly misled its New York parent and the US Federal Reserve by failing to report losing trades."

If nothing else, and if the whistleblower's allegations are proven true, it will certainly explain JPM's trading perfection: because when one excludes the "losing trades" from one trading record, it is rather easy to end up with nothing but trading wins.

SMH reports that the "explosive" allegations are contained in a submission by the person to the Senate inquiry into the performance of the Australian Securities and Investments Commission.

It certainly wouldn't be the first time a disgruntled whistleblower has spoken up against his former employer (especially with a delay as substantial as this one), but in this case this may be more than just someone seeking to recoup compensation from an untimely termination: "Business Day has met the person and agreed to allow him to remain anonymous. He appears to be credible. The person complained to ASIC and later went to work for the regulator, but he said the regulator failed to investigate his claims."

Credible or not, JPM promptly denied everything:

A spokesman for JP Morgan denied the allegations. "The claims are false and misleading," he said.

Or, as Jamie Dimon would call it, a "tempest in a teapot.  Some more from SMH on just how JPM was violating regulations, and of course, the law:

In his submission, published by the inquiry, the person said he was employed at the Sydney office of JP Morgan between 2004 and 2007. He worked for a team involved in the post-trade management of the bank's OTC (over the counter) equity derivative business for the Asia-Pacific region.


In 2007, before the global financial crisis, he became increasingly concerned by "certain practices that appeared to circumvent regulatory commitments and risk management expectations," he said.


These included:

  • Misleading reports being provided to head office and the Federal Reserve Bank of New York on the number of outstanding trades.
  • Trades not being booked into the system until they were ''in-the-money''.
  • Trades not booked into systems and only being tracked by paper-based legal agreements, which would be ''torn up'' if required, thereby leaving no trace.
  • Bypassing or attempting to bypass the opinions of in-house lawyers to complete work faster, even if this resulted in incorrect legal agreements being signed by the traders and sent to other major banks as final confirmation of the terms of the trade.

It is here that the case gets a little hazy, because it becomes clear that the "person" may have had a conflict of interest and a bone to pick with JPM, which dilutes some of his/her claims no matter how truthful they may be:

The person said he sought to discuss his concerns with lower and middle management but was warned that ''front office would get rid of me if I persisted''. ''JP Morgan's 'Worldwide Rules of Conduct' state: 'The most important rule is also the most general: never sacrifice integrity, or give the impression you have, even if you think that it would help JP Morgan Chase's business'.


''In support of this policy, I lodged a complaint with senior management fully expecting to be able to discuss all my concerns and receive guidance from the relevant departments, including legal and compliance. This did not occur and instead I immediately stopped being paid.''


He said his inquiries resulted in him being threatened that his employment would be terminated because of the complaint. The person was employed by an agency. ''I was informed that I would not be paid my outstanding salary and any future salary until I signed a new employment contract reducing my notice period from one month to one week,'' he said.


''My contract was terminated shortly after for 'economic reasons'.


''I had no contact with senior management or legal and compliance and no opportunity was provided.'' The person lodged a complaint with the Fair Work Ombudsman and said he authorised and urged the agency to contact ASIC but that it declined to pursue the matter.


The person formally reported his claims of misconduct to ASIC on November 27, 2008. He subsequently met two ASIC employees on January 5, 2009, at the regulator's Martin Place offices. He claimed the officers displayed little understanding of the matters raised and asked why he had made a misconduct report.


''The interviewers were surprised and somewhat incredulous by my response that I believed it was the right thing to do,'' he said.


''The overall feeling that the interview conveyed was that ASIC was unprepared to accept reports of misconduct and had no skills to manage such matters. The meeting ended and, though I advised I was ready to provide further assistance, I was not contacted by ASIC. As far as I am aware ASIC never contacted the Fair Work Ombudsman.''


On May 16, 2012, the person addressed an online inquiry to ASIC (attached to his Senate submission) regarding the whistleblower protections in the Corporations Act. He said the regulator declined to afford him whistleblower protection. A report from the Senate inquiry is due on Friday but is likely to be delayed.

Being fired for daring to blow the whistle against the bank with the "fortress" balance sheet? Hardly surprising, especially if it took place long before JPM accrued some $25 billion in litigation reserves. If this had happened now, probably nobody would care: after all, except for Tim Geithner, nobody has any doubt that in the New Normal, banks are nothing short of the new organized crime cartel, where rampant breach of the law is encouraged by the very (bribed) regulators who are supposed to be keeping it in check.

That said, we wonder if and when the Fed were to take the whistleblower's allegations seriously and demands a rerun trading blotter by JPM, this time without all the losing trade fabrications, just how many trading losses JPM would have in 2013. Because one thing is certain: one doesn't need a whisteblower stepping up to know that having zero trading day losses in an entire year can only be achieved through market manipulation and/or breaching the rules: two things we now know that JPM is quite proficient at.

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kliguy38's picture

Much ta do about nothin' .....this guy's already jumped by now

Greenskeeper_Carl's picture

JP morgan lied...In other news, water is wet

Dr Benway's picture

By refusing to enforce crime, regulators have effectively legalized most types of securities fraud in Australia. This is not an exaggeration. Check out my newly updated blog for proof.

markmotive's picture

The media is bought and paid for so don't expect much oversight from them.

knukles's picture

So, they do Satan's work?
Just askin'....

whotookmyalias's picture

You wont see real news in the mainstream media, there was another shooting that they need to cover to death and some celebrity got married.  Meanwhile Rome burns around us....

NidStyles's picture

I hope someone can answer my question here:


Has anyone ever thought that it's possible the military actually took stewardship of the actual government when they saw that things were likely going to go rather violent in the begining of all this mess. You know the tanks on the streets nonsesnse some important guy was quoted having said. Well, I was figuring that it was likely that the military actually took over to stop the ruling class from cutting the pensions of all of those generals, you know tanks on streets.... 


Am I the only one that looks at it from that angle? 

All Risk No Reward's picture

The Money Power finances and controls the military the same way they finance and control government and every othe rmajor societal institution.





overmedicatedundersexed's picture

why bother with this? OUR DOJ dear leader holder said in public: "we can't bring the TBTF banks to justice because they are TBTF" any crime by TBTF is never litigated other than a token fine..what part of "above the law" do we not understand?

thestarl's picture

ASIC the corporate regulator in Oz is much the same as the SEC in the states the proverbial toothless tiger 

TheReplacement's picture

This is just the prelude.  The bankers are being let to run wild believing that by controlling money/currency they control everything.  There is one group of people on this planet that have shown their willingness to put a bullet in the heads of the corrupt.  Marxists everywhere must be absolutely beside themselves waiting for the day they do it.

Jumbotron's picture

"Because one thing is certain: one doesn't need a whisteblower stepping up to know that having zero trading day losses in an entire year can only be achieved through market manipulation and/or breaching the rules: two things we now know that JPM is quite proficient at."


There can be NO whisleblowing and hence no punitive action taken against those whom the whistle was blown over.....because EVERYONE knows that the only way to keep the collapse from happening is to have the market be manipualted 24/7.

There is no crime when crime is made legal through the total ignoring of the law.

Canadian Dirtlump's picture

So they are pathologically criminal and both serve the master and pay off the system for gain? Mind blown.

what's that smell's picture

so, if jamie and JPM are above the law, they have to obey the law?

if our hero would have been blowing-the-diamond rather than blowing-the-whistle, he would be up to his ass in blow-and-hookers rather than blowing-in-the-wind.

remain calm's picture

Who sheds a tear when Jamie takes a bullet?

Chupacabra-322's picture

So, who gets the nail gun to the head this time?

BanksterSlayer's picture

And by how much has the value of this whistleblower's BOLI life insurance premium gone up?

intric8's picture

The decision maker who ordered all russian assets frozen should be first in line for nailgun time

NidStyles's picture

Nail guns are so russian. You need a real American tool. A supressed .45 and a bathtub filled with acid. 

Wile-E-Coyote's picture

No; Polonium 210 is the poison of choice, come on; this is the 21st century.

NidStyles's picture

Nope, budgets bra.... 

Everybody knows the guberment has been cutting jobs and using Austerity, which created a liquidity trap...

MachoMan's picture

I would presume it would need to be integrally suppressed or, alternatively, modified to be a single shot.  The cycling of the action of semi-autos lets out a LOT of sound.  With a bolt action rifle and subsonic ammo, you could fire it into the air and no one can hear, even standing next to it.  However, as soon as a bullet traveling at high speed hits virtually any object, it creates a really loud noise, including just shooting paper.

Global Hunter's picture

shocking!  Next you'll be telling me Goldman Sachs lies too.

disabledvet's picture

well...having attempted to blow up AIG...something that cost the US taxpayer 185 billion dollars i they really know the balance sheet that they were using to "launch the surprise attack on the biggest war effort" probably in all history?

I fail to see how Goldman Sachs survives should JP Morgan suddenly fall flat on its face.

AIG still looks alive and well amazingly enough.

"Russia and China suddenly demand Japan come clean on Fukushima" and...well, say hello to President Biden and all out war.

The reality of all our lives down here in the cheap seats is that we are simply not in the information loop...nor is our "responsible media" even bothering anymore in their Civic Duty to inform the American people of the most basic issues of Total War and it's "complications."

If I were to hazard a guess "should the President veto the 600 billion dollar Pentagon spending bill his veto will be overridden by a huge majority and the impeachment proceedings will begin."

NoDebt's picture

.....and nobody goes to jail.  That's probably the last words spoken about the plan before it was put into action years ago.

kchrisc's picture

Now, based on what I saw at SAC, it is those not from Ashkenazi that go to jail.

buzzsaw99's picture

the technical support person is lucky he didn't get nailed to death in a hot tub

Aussie V's picture

They don't know who I am yet!!


(and just in case they find out, I got rid of my tub)

CheapBastard's picture

The Law only applies to the little peeples.

fencejumper's picture

Being a believer in peaceful solutions I nevertheless have in my private vault the images of a few men I'd love to unceremoniously knock on their asses. Dimon is at the top with Blankfein a very close second.

Kirk2NCC1701's picture

1. "There's nothing more predictable than the laws of Nature and Human Nature". -Kirk

2. "The beginning of Wisdom is to give up all Illusions and Pretenses."

Plan and act accordingly.

JLee2027's picture

The beginning of Wisdom is fear of the Lord. - the Bible

Fixed it for you.

NidStyles's picture

Kirk was a God fearing Christian sir ;-)  

Serenity Now's picture

Oh, then I up arrow all three of you.  :)

The last thing I'm going to do is put my faith in humanity.

JailBanksters's picture

I'm not surprised JP Morgan lied, it's just another day.

I would be surprised if JP Morgan did NOT lie. It would be like, what's up with that, there's got to be something else going on.

Took Red Pill's picture

< Jamie will get jail time

< nothing more than a wrist slap

fencejumper's picture

Hah, TRP, if you'd reversed the options you'd be getting the ever-preferred UP votes. ;-)

disabledvet's picture

ummmm..."Wall Street ain't a democracy." If that market opens Tuesday down a thousand points with treasury yields plunging then you know the value of the lie.

What if the war effort trumps the need for TBTF 2.0?

I'd keep all my money in Morgan Stanley and "hope for the best" actually.

Kinda scary if you think about it.

NidStyles's picture

I would rather be in Australia and live in a nation that is not likely going to be invading anyone. Then I can feel better about not supporting the killing. 

Jumbotron's picture

< Jamie will get jail time

< nothing more than a wrist slap

      1,000,000  < NOTHING WILL HAPPEN AT ALL

yellowsub's picture

Doesn't sound any different than how they run their ops in the US.

foxmuldar's picture

Hey whats the big deal? if Obama can lie so can JPM. Maybe JPM  used the Turtle method of trading to post all those wins. Just ended, Jimmy Johnson wins the 600 at Charlotte. Danica blew an engine. 

q99x2's picture

Maybe Jamie Dimon will get arrested by some other government that will prosecute him to the full extent of the law. With any luck it will be China, Russia or Somalia.

intric8's picture

Explain someone, why wouldnt they want to disclose losing trades to the FRB? As long as those trades arent compromising risk management, whats the big deal?

Wile-E-Coyote's picture

Ummm why not report the losses indeed. Unless they are massive.

RichardP's picture

I'm sure there are commissions and/or profit-sharing incentives operating in here somewhere.  Can't tell parent company a lie to get bigger commissions / profit-sharing, and then tell the truth to the FRB.

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Newsflash!  Newsflash!


JP Morgan IS the FED!!!!!!!  Don't we know this by now!   Geez!!!!!!!



Best Guess Fed ownership:

The top 4 banks: B of A, JP Morgan Chase, Citigroup & Wells Fargo-Wachovia control roughly 54% of the stock of the Federal Reserve Bank. The top 10 banks, including Goldman Sachs, HSBC and the Bank of New York control roughly 70% of the stock.