Did One Of Jamie Dimon's Closest Traders Betray Him And Cost The Firm Billions In Losses?

Tyler Durden's picture

As we predicted some time ago, it would be only a matter of time before the story of how one failed prop desk trader, in this case Boaz Weinstein who blew up DB Prop only to be resurrected as the successful head of Saba Capital, took down the London whale Bruno Iksil. Sure enough over the weekend, the NYT penned a largely one-sided if entertaining read: "The Hunch, the Pounce and the Kill" which begins as follows 'It was last November, and Mr. Weinstein, a wunderkind of the New York hedge fund world, had spied something strange across the Atlantic. In an obscure corner of the financial markets, prices seemed out of whack. It didn’t make sense. Mr. Weinstein pounced." The trade of course was the IG 9 -10 year which we have dissected infinitely in the past two days. And while the NYT story makes for great copy, and has a great narrative it is missing one crucial feature, namely what happened in those two crucial months before Boaz was pitching the IG9 trade, and thus during which he was establishing the position (because only those "hedge fund managers" who appear on CNBC discuss their positions if they haven't already built up their max positions). What happened is the following: "Saba Capital Management LP... hired Toby Maitland Hudson from JPMorgan Chase & Co. as the firm’s assets reach $4.1 billion, according to people familiar with the hire. Maitland Hudson, who started at Saba in New York last month, ran JPMorgan’s proprietary trading of derivatives tied to commercial-mortgage bonds and will focus on relative value trades."

So... one wonders, did Boaz hire JPM prop trader Maitland Hudson (who was also formerly a correlation trader at Credit Suisse from 2003 to 2004 per LinkedIn) in what is nothing but a fishing expedition, so well known to the hedge fund industry, where one gets a job and a guarantee in exchange for the firm's entire P&L and positional blotter? Yes, Hudson traded prop CMBS, put with all prop traders sitting next to each other and full updated portfolios instantly available to all, everyone knew what everyone else was doing, something we discussed back in 2009 when we demanded a seating chart of Goldman's prop and flow traders. In which case did Saba know well in advance of everyone what the biggest CIO prop bet was, allowing it to take appropriate bets? Furthermore, if Saba learned of Iksil's entire blotter by hiring one JPM trader, does he know all other JPM positions as well? And how soon until a "hedge fund syndicate" leaks to the WSJ and Bloomberg at the same time just what other Fed-backstopped market moving JPM positions need the urgent attention of the market?

Of course, all this assumes that Iksil and the CIO had the IG9 trade on in September. Which is possible because as we noted this is around the time the delta hedge started going horribly wrong for JPM and it was forced to start selling IG9 to offset its tranche exposure.

And if indeed the case, the biggest irony here is the implied one: that Jamie Dimon was ultimately betrayed by one of his own - sure he had to go on gardening leave, but with a $100 billion notional position, being out of the market for 1 month does nothing for a positional refresh - it is not like JPM could unwind that position then.

It certainly can't unwind now. And with every day that IG9-10Y leaks wider, it simply means more and more pain for JPM which allowed itself to be taken in by the oldest ruse on Wall Street.

Finally, and this is the $64K question: what other trade secrets of JPM have been leaked to the hedge fund world, which suddenly finds itself with all the leverage in taking on the TBTFs?

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fonzannoon's picture

I read that stupid times article. What is amazing is how they failed to even acknowledge that JP Morgan could take down their depositors with them.

Divided States of America's picture

The enemy of my enemy is my friend.



The enemy of the enemy also used to be the enemy.  

Things that go bump's picture

It puts me in mind of the fable of the maiden and the snake.  He knew what he was when he picked him up.  

pkea's picture

the most sincere thank you to Maitland....

eatthebanksters's picture

What goes around comes around...karma is a bitch and Jamie is just starting to feel some of the pain he has caused the world.  I'll only be satisfied when he's grabbing his ankles and screaming...

LMAOLORI's picture


Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading — not behind banks that might make mistakes in derivatives markets, butbehind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.





As An Encore to Bailing Out the Big Banks, Government to Backstop Derivativees Clearinghouses … In the U.S. and Abroad


Problem Is's picture

We knew when The Bernank approved of BofA putting Merrill's derivative exposure on the deposit BofA bank side with over $1 trillion in FDIC insured deposits...

And furthermore, after watching MF Global's derivative counter parties steal customer deposit accounts with zero repercussions...

TARP II: Funded by FDIC and YOU The Taxpayer
We can see that the mechanism for TARP II is in place and the worms in Congress won't be forced to publicly vote for welfare for their owners again...

The worms will simply say they have to fund the replacement of those stolen deposits and who could have seen it coming...

And finally, Jamie owns Barry Soetoro... Jamie & Lloyd et al pull the strings and Obama Bin Lyin' does the soft shoe...

NumberNone's picture

Agree 100%.  This is not a freaking game of polo where the wealthy get to slap each other on the back at the end and proclaim what great game the other played, no harm done.  These assclowns bilked JPM, who is funded by depositors and now technically backed by US taxpayers.  This shit has got to end.  These assholes need to have their own personal wealth tied to every transaction and any loss is first funded by their bank accounts and assets especially if you are FDIC.  See how funny this shit is then.

oldman's picture

Yeah, I know---

I was feeling the same thing

Poor old Jamie Dimon

If a man can't trust his closest and dearest friends

 Then he truly is a victim

And if you can't your banker

Who, I say, WHO can you trust ???     om

stocktivity's picture

Arrogant assholes only think they have friends.

eatthebanksters's picture

Just maybe if we broke up these TBTF banks we wouldn't have a problem this big...ya think?

Problem Is's picture

"What is amazing is how they failed to even acknowledge that JP Morgan could take down their depositors with them."

NY Times: Corporate Whore Media Propaganda Outlet
Omitting facts is a key tool of mind numbing propaganda...  Edward Bernays told me so...

The slant out of the collective orifice(s) of the NYT, Wash Post and AP, et al is consistent and obvious. US citizens don't need the failed Dinosaur media, mouth pieces of oligarchy...

Ident 7777 economy's picture

What has the NYT group of companies dwindled to?


from 7BB down yrs ago to around 1BB and the owners/receipients of the dividends are having to take REAL jobs the payout has become so meager?

The Axe's picture

Whats a couple of billion fucking between friends???

tocointhephrase's picture

Take em down boys (and girls)!

TheTwoJohns's picture

BIG SHORT second edition. revised. 2012

taniquetil's picture

But didn't JPMs trading losses come from going short CDS (long the economy)?


Michael Lewis next book to be called "The Big Long"?

TheTwoJohns's picture

Iksil started sellin CDS that means he was going long on CDX IG9. correct me if am wrong..

lolmao500's picture

Give this man a medal!

williambanzai7's picture

Look at the advertising copy in the NYT. Who do you think buys all that designor shit and expensive jewelry? You think they want to poke them in the eye?

The MSM sucks. This shit is all gonna end badly. You know how I know? A penthouse went for a record $90 million in cash. When that happens in Manhattan, brace yourselves for impact.

cherry picker's picture

I agree.  Your comment is reinforced by paintings selling for $120 million.

williambanzai7's picture

It wasn't even a painting. It was a pastel on board. And you know the rule of thumb in the art business is your home must cost more than the painting hanging on the wall...

What we are seeing is money like this sloshing around in an FDIC insured bucket. Now the hedge funds are trying to grab it. This is not a reformed banking industry we are seeing.

ReactionToClosedMinds's picture

keep the faith & keep up the good work sir!

absolutley agree, one of the 'unintended consequences' of liquification of debt overloads is more high oxygenated fuel floating around to start more & more fires.

Case in point, financial services industry.  Am big believer that capital markets efficiency is one of the keys to Amerika's long term success.  But Wall Street cannot run the casino game as the house via the NYFederal Reserve presence within the Fed overall to the detriment of Main Street USA economics.  Or risk it because some smarty pants with access to historic levels of easy money can potentially blow up the world as he/she seeks a bigger house in Greenwich and brag on some golf course.

AN0NYM0US's picture

Then you Banzai must (or should) live on Severn Rd

CrazyCooter's picture

Hmmm, I still have some art hanging up from grade school that is marked to model. It sounds like I might need to upgrade my house. I wish the fed would let me pawn it ...



The Alarmist's picture

In the world of firms that own big Prop Desks, long-term results aren't as important as the ability to comprehend very big ways to make very big things happen so that the mother ship can collect big tolls along the way.  

PV of a lot of cash between now and Armageddon is probably worth more than the PV of the FV of Armageddon.

Quinvarius's picture

JPM might be a short if it wasn't for all the free Fed bailout money they are getting right now.  I don't even need to see proof.

Quintus's picture

I wonder if someone is about to 'London Whale' JPM's precious metals 'Hedges'.

Could this have anything to do with the Comex being unexpectedly declared TBTF and eligible for taxpayer support a couple of weeks ago?

Perhaps it could.

Winston Churchill's picture

The enema of JPM will be the enema of us all.

Not Too Important's picture

The enema of my enemas is my friend.

lolmao500's picture

Well this is fun...


Posse in Hawaii: 'Shocking' news coming

“From what you’re telling me,” Gillar said, “it sounds like the next press conference is going to be even more amazing than the last press conference back on March 1st.

“It will be,” Zullo responded. “The information … is going to be breathtaking when it’s released.”

Problem Is's picture

The Corporate Whore Media is out in front of you, my freind...

Propaganda Courtesey of AP:

Trump overshadows Romney with 'birther' talk

Lead sentence, 2nd paragraph:

"The debunked conspiracy theory among conservative activists dubbed "birthers" charges that Obama is not constitutionally qualified to serve in the White House."


Where are your facts to make that assertion, Corporate Whore Media Idiot Steve Peoples?
Things that go bump's picture

Do people who believe this think they are going to get a do-over because someone broke the rules?  Really, what is the point here?  I believe the fact that Obama was elected makes him eligibile and quite unassailable in this regard.  This birther thing is a waste of time at best.  People really ought to get over it and deal with reality because that is what grownups do, no matter how unpleasant.  Even if incontrovertible proof of The Current Occupant's ineligibility were found right now (and if it were there to be found, I am sure it would have been found long since), it would change nothing. This is a dead end.  A false trail. Even worse, it sounds like sour grapes.  It was probably put out there intentionally as a type of emotional release valve.

G_T_A_44's picture

When the dust settles, JPM is looking @ $18-$32 BN in losses rather than the paltry $2 floated for public consumption. It may take a bit more time (2-3 months) for its unveiling, yet it shall be disclosed for all eyes.

lolmao500's picture

And they still won't go under... disgusting.

Zero Govt's picture

..but, but it's "Gods Work"

The Lord works in mysterious ways though we've all got a pretty darn good idea how this WS-DC-Fed lark works now

dbTX's picture

JPM continues to take crazy risks because they know their are back stopped by the FED.

jayman21's picture

JPM backed by the private FED or do they own the FED?

Zero Govt's picture

and The Fed owns the IRS as your humble small business and taxpayer is the only real source of State income

Stop Paying Your Taxes ...and fuk the Fed 

Not Too Important's picture

We can't stop paying the Fed. What about the 1.2 quadrillion in derivatives we're backstopping? I have to contribute my 10$.

Benjamin Glutton's picture

are you suggesting a former JPM employee took advantage of insider knowledge to fleece his former employer?



I guess most ZH readers expected a friend of the company would be found on the other side of this multi-billion  dollar 'loss'.

TheTwoJohns's picture

 "I want to tear his heart out and eat it before his eyes while he's still alive" FULD

oldgasII's picture

I was just watching a Japanese movie, "Outrage-The way of the Yakuza."  The theme of it is despite the pledges of loyalty and brotherhood they all betray each other for money and power.  I'm sure glad we don't have that in the US.....Oh wait.

ThisIsBob's picture

They are eating eachother.  Good.

falak pema's picture

Betrayal the word that scares the shits out of an Oligarch and all closed shop empires.


‘A nation can survive its fools, even the ambitious. But it cannot survive treason from within... for the traitor appears not as traitor in his emperor’s own trusting eyes... I am quoting Cicero, famed Roman philosopher, politician, man of ethics.’ Frederick II of old said these famous words, when describing the war of the Lombards that destroyed his hold on Holy land after he had negotiated a peace with al-Kamel giving him access to Jerusalem for eight years, without having to shed a single drop of blood, during his diplomatic dealings called the sixth Crusade! He lost his hold on the Holy land as the local barons revolted against his role, seen as apostate and as appeasing emperor who respected the Moslem and who thought that the Crusades were a sterile game.


So when you lose a battle, it is never your fault it is the fault of the renegade feudal. Age old excuse for a crumbling Empire. Of course, Frederick II lost it all and more in his subequent larger civil war with Pope Innocent IV in Italy, his dynasty extingished subsequently. Big loss for German feudal order. Huge. 


Jamie Dimon should meditate what Fred said. Poor Fred, he was three centuries ahead of his times. He should have been born during the Renaissance. I'm sure JAmie feels the same way; I was born too late or too early...it's just not my day today!


ReactionToClosedMinds's picture

Superb post ZeroHEdge.

NYTimes..... all the shilling fit to print!  Not even Rupert Murdoch has the confidence or nerve to do what the NYTimes consistently does.

And don't get me wrong .... I actually think some of the best 'journalists' (if such a thing really exists) still reside at the paper.  But where or where are the editors?  And Jill Abramson, you would think, fits the bill for what they should have ... but methinks she is so enamored of her 'role' and NYT politics that she has no clue as to the broader realities.