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Here Is What Happened The Last Time A Trader Was Caught Manipulating CDS Marks

Tyler Durden's picture




 

Just because the market is so stupid it completely ignores what the news of the day is: namely that JPM engaged in what Jacob Zemansky on TV just called criminal behavior when it consistently mismarked its CDS book, as it itself admitted 10 minutes before releasing its earnings today, an act that in itself is nothing short of what Barclays is in the 10th circle of hell for due to blowing up Lieborgate sky high, here is a stark reminder of what happened the last time a trader was caught fudging his CDS book...

From Bloomberg, May 11, 2012:

Ex-UBS Trader Sues After Firing for Mispricing Securities

 

A former UBS AG (UBSN) trader who was fired after the bank found he worked with a colleague to manipulate trading figures sued for unfair dismissal in London.

 

Ramon Braga, a trader on the bank’s corporate-credit desk in London, was fired for collusion in the alteration of “marked-to-market” values of credit default swaps by Denis Minayev, UBS staff said at an employment tribunal yesterday.

 

Minayev, a proprietary trader, “re-marked” Braga’s trading book on 66 occasions, even though he shouldn’t have had the authority to do so, UBS investigator Richard Kennedy said.

 

If you shift one of those markers, it can give a completely false picture,” employment Judge Graeme Hodgson said at the hearing.

 

Braga, who is suing for unfair dismissal, was an inexperienced trader who was “thrown in at the deep end,” his lawyer, Amy Sander, said at the hearing. He wasn’t aware of many of the changes Minayev made, she said, and thought his actions were permitted by managers. Braga was also accused by UBS of “procuring a false broker quote,” she said.

 

UBS is already dealing with the fallout from what the bank said were unauthorized trades by London-based UBS employee Kweku Adoboli, which led to a $2.3 billion loss, regulatory probes and the resignation of Chief Executive Officer Oswald Gruebel. JPMorgan Chase & Co. (JPM) CEO Jamie Dimon said yesterday his New York-based firm suffered a $2 billion loss after a trading unit’s “egregious” failure to manage risks.

 

Internal Probe

 

Kennedy, the UBS investigator, said the bank had uncovered the re-marking of Braga’s trades during an internal probe into him and Minayev, who is also no longer at the firm. Asked why a proprietary trader had been able to access Braga’s trading book, Kennedy said Minayev’s role had changed and he was asked not to adjust positions any more.

 

“Despite his change in role, he hadn’t had his marking privileges removed,” Kennedy said.

 

Dominik Von Arx, a spokesman for Zurich-based UBS, said Braga “was a junior employee” in the bank’s fixed-income, currency and commodities unit.

 

He was dismissed for gross misconduct in October 2011 following an investigation into alleged mismarking,” Von Arx said in an e-mailed statement. “UBS has zero tolerance for such behavior.”

 

During cross-examination of Braga today, UBS lawyer Bruce Carr said Braga had asked a broker friend to send him a quote that justified changes made to his valuation, after a colleague said the price was too high.

 

‘Unsolicited E-mail’

 

“You get an entirely unsolicited e-mail that happens to fit” the valuation, Carr said. “That’s quite a coincidence, isn’t it?”

 

Braga responded that his “dismissal shouldn’t be based on speculation or coincidences.”

 

The product being re-marked was a credit default swap on European industrial-company bonds, which was illiquid and difficult to value because it was rarely traded.

 

Lawyers for Braga questioned Paolo Croce, UBS’s European head of rates, at the continuation of the hearing today about the close relationship between proprietary traders such as Minayev, who trade with the bank’s money, and flow traders like Braga, who execute orders on behalf of clients.

 

“All the other flow traders followed the direction of Mr. Minayev,” Braga’s lawyer said.

 

Croce said while flow and proprietary traders exchanged information, they weren’t supposed to take instructions on pricing.

 

Minayev had told Braga, “I need this to move,” according to Croce. “He told him ‘I’m down $9 million today.’”

Hmm: oddly verbatim to the e-mails all those Barclays traders who engaged in Libor manipulation were sending out. And now that we know JPM engaged in at least CDS type of MTM fraud, how long until we find that the firm is just as complicit as Barclays and other BBA constituents when it came to "fixing" that other component of the CDS market: Libor? Oh wait, Jamie had nothing to say on the issue - must mean all is whale.

 

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Fri, 07/13/2012 - 10:18 | 2612754 nope-1004
nope-1004's picture

Marked to myth book value, earnings, share price, etc......  JPig is a sham, Dimon a first rate liar.

 

 

Fri, 07/13/2012 - 10:21 | 2612774 Winston Churchill
Winston Churchill's picture

The Muppets have already got it.

Algo's trading Unicorn shit with Algo's.

The market is dead,long live the 'market'.

Fri, 07/13/2012 - 11:22 | 2613002 NotApplicable
NotApplicable's picture
It's Still Real To Me Dammit!

 

http://www.youtube.com/watch?v=BvTNyKIGXiI

Fri, 07/13/2012 - 11:31 | 2613033 NotApplicable
NotApplicable's picture

Oh, and speaking of government related scams. I get to spend the rest of my day dealing with this scam, where people are given the bank routing number (124085024) in exchange for SSNs so Obama can pay their bills. Worse yet, it's a "real" bank in Utah (GE Capital).

http://answers.yahoo.com/question/index?qid=20120710195938AA887MD

Fri, 07/13/2012 - 10:27 | 2612810 Unprepared
Unprepared's picture

Just like Buffet, I'm sure Dimon puts bath salt in his bathtub.

Fri, 07/13/2012 - 11:51 | 2613112 Sudden Debt
Sudden Debt's picture

who doesn't?

Fri, 07/13/2012 - 10:29 | 2612815 Rainman
Rainman's picture

Even the lowest-rung street mutt hustla knows you never leave a trail. Bankstas are too street stupid to be out of jail ... assuming humans lived in a lawful world.

Fri, 07/13/2012 - 10:51 | 2612901 mick_richfield
mick_richfield's picture

The law says "Gold and silver, and only gold and silver, are money."

If that law is broken how can there be other laws? 

The men (?) who are empowered to create false money will shortly own everything that they want to own, very much including all your laws, your legislators, and all tomorrow's parties.

 

 

Fri, 07/13/2012 - 11:17 | 2612988 The Big Ching-aso
The Big Ching-aso's picture

 

 

At minimum Cheech & Chong justice needed.   "Bailiff, whack his pee-pee."

Fri, 07/13/2012 - 11:23 | 2613008 maxcody
maxcody's picture

JPM also has problems with SLV.  Made a comex bank in hours instead of weeks when believed they did not have the silver?

Fri, 07/13/2012 - 10:45 | 2612876 EverythingEviL
EverythingEviL's picture

Not sure if the market is stupid or if everything is just artificially pumped up by those in power so as to avoid the crash that would happen if they did not act.  Obviously a certain goup doesn't want that to happen, everything is fake.

Fri, 07/13/2012 - 11:02 | 2612933 Whoa Dammit
Whoa Dammit's picture

JPM's reported net income today is down 9% and the stock is up over 4% today.

You can't drink enough or do enough drugs when playing the market.

Fri, 07/13/2012 - 12:44 | 2613281 TPTB
TPTB's picture

I wonder if the megabanks have some sort of secret separate ponzi deal worked out to implausibly prop each other up during times of imminent crisis?

Fri, 07/13/2012 - 10:18 | 2612757 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Friday the 13th Silver Silver Bomb!

BUY SILVER!!

Fri, 07/13/2012 - 10:42 | 2612863 gmrpeabody
gmrpeabody's picture

I did..., is there a button or something to show that "I gave"?

Fri, 07/13/2012 - 10:53 | 2612874 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Yes.  Your button is the silver in your hand that is real money and has no counter party risk.  Put it in your coat pocket, take it to parties, and show your friends what real money looks like.

Fri, 07/13/2012 - 11:34 | 2613048 NotApplicable
NotApplicable's picture

I've always got a U.S.S. Constitution round in my watch pocket, just in case I need to school anyone about Article 1, Section 10 of the US Constitution.

Honest Value Never Fails

Fri, 07/13/2012 - 10:21 | 2612773 Silversem
Silversem's picture

Even better: Buy cfd's on silver!!

Fri, 07/13/2012 - 10:29 | 2612817 tmosley
tmosley's picture

That is an extraordinarily bad idea when the plan is to wreck the COMEX which sets the spot price.

Fri, 07/13/2012 - 10:30 | 2612818 fuu
fuu's picture

Fuck paper.

Fri, 07/13/2012 - 10:53 | 2612904 mick_richfield
mick_richfield's picture

In Amerikanski Soyuz, paper fuck you!

Fri, 07/13/2012 - 10:23 | 2612776 MillionDollarBonus_
MillionDollarBonus_'s picture

I'm not entirely aware of all the issues involved here, but my impression is that it's just another overexaggerated conspiracy. I'm a very open-minded person, but this seems way too conspiratorial, even for me.

Fri, 07/13/2012 - 10:28 | 2612806 Stackers
Stackers's picture
Con-spir-a-cy 1. An agreement to perform together an illegal, wrongful, or subversive act. 2. A group of conspirators. 3.  An agreement between two or more persons to commit a crime or accomplish a legal purpose through illegal action. If the shoe fits ...............
Fri, 07/13/2012 - 10:30 | 2612814 Marginal Call
Marginal Call's picture

OK Condi.

Fri, 07/13/2012 - 10:47 | 2612886 mick68
mick68's picture

You need to hire someone to write a book about you, cause apparently you don't have the foggiest clue about yourself.

You are anything but open to believing in conspiracies fool, cause a massive one has been laid bare before your eyes, with proof, and you stammer and stutter like the fool you are.

People open to seeing conspiracies don't need them laid bare for them, they can see them unfold on their own, like Tyler does. In stark contrast, you are an ignorant dufus who doesn't recognize his ass when he sees it in the mirror.

Fri, 07/13/2012 - 11:00 | 2612924 MillionDollarBonus_
MillionDollarBonus_'s picture

I tried to read through the article, but I got bored when Tyler started getting into one of his complicated rants. Sometimes you just need to go with your gut and in this case my gut tells me that this is simply more zero hedge conspiracy.

Fri, 07/13/2012 - 11:04 | 2612944 El Viejo
El Viejo's picture

You're going for the all time record in Junks aren't you?? You sly dog you. I like your style.

Fri, 07/13/2012 - 11:41 | 2613076 Blythes Master
Blythes Master's picture

Gawd I wish people would stop feeding my pet!

Tue, 07/17/2012 - 23:11 | 2626823 MeelionDollerBogus
MeelionDollerBogus's picture

An immune system needs to be smarter than "I see no /sarc so I believe what I'm reading"

MDB serves a purpose and so does your interaction with the MDB protein tag.

Fri, 07/13/2012 - 11:17 | 2612986 gookempucky
gookempucky's picture

Here is a slap in the face-rub your nose in it spiniskie.

Shares of JPMorgan Chase & Co (JPM) leapt 4.5 percent to $35.59 after it reported $4.4 billion of credit trading losses in its London offices, but still earned an overall profit that was barely dented by the bad trades.

Barely dented is surely funny word spin.

More spin

Reuters) - JPMorgan Chase & Co, the biggest U.S. bank, said it had lost $5.8 billion in 2012 from disastrous credit bets and that traders might have tried to conceal the extent of the losses earlier this year.

Of the trading losses, $4.4 billion came in the second quarter. But the bank still generated nearly $5 billion of overall profit for the period.

Totally hilarious that jpm can have 4 billion loss yet still made 5 billion in profit---math does not compute.

Weak try MDB

Fri, 07/13/2012 - 10:28 | 2612782 Hoody Who
Hoody Who's picture

In big red letters at the bottom of CNBS tv screen a moment ago, it said breaking news.  EUR/USD hits new 2-year low.

All the while the EUR is ripping north.   Gotta love it.

Maybe they run breaking news from the day before.  LoL 

 

Fri, 07/13/2012 - 10:56 | 2612910 mick_richfield
mick_richfield's picture

The times to watch out for are when they run breaking news from the day after.

Or should I say ... from "The Day After."

 

Fri, 07/13/2012 - 10:29 | 2612794 LawsofPhysics
LawsofPhysics's picture

Many have said it, but it must be repeated until executed; nothing changes until there are real fucking consequences for bad behavior AT ALL LEVELS.

Wake me when the guillotine is rolled out and put to use.

Everyone should notice how the issue of holding the financial world accountable will be ignored by politicians from both parties.

Fri, 07/13/2012 - 10:47 | 2612884 gmrpeabody
gmrpeabody's picture

"Wake me when the guillotine is rolled out and put to use."

Well for Christ's sake..., their front door parking privileges are under review, what the hell do you want!

Fri, 07/13/2012 - 10:50 | 2612896 ghengis86
ghengis86's picture

Yep. Plain and simple.

Morals aside, if one robs a bank and gets caught and only has to give back a fraction of the take plus fire the getaway car driver, what (dis)incentive is there to stop? You just get another driver and move on to the next bank.

Since the cops/gov are on the take, this will continue until they show up at a bank to rob and all the patrons are waiting with guns, knives, pitchforks, torches and rope.

Until then....same as it ever was

Fri, 07/13/2012 - 10:52 | 2612903 Hype Alert
Hype Alert's picture

Everyone should notice how the issue of holding the financial world accountable will be ignored by politicians from both parties.

Yeah, it reminds me of Tag Team Wrasslin!   It's just entertainment for the masses while the looting continues.

Fri, 07/13/2012 - 11:31 | 2613036 gookempucky
gookempucky's picture

Maybe the Vermeer 1250a 80hp chipper would be more appropiate ?

http://www.youtube.com/watch?v=Lctm3nifEaA&feature=fvwrel

Fri, 07/13/2012 - 15:34 | 2614159 Winston Churchill
Winston Churchill's picture

Feet first I hope.

Fri, 07/13/2012 - 10:24 | 2612795 midgetrannyporn
midgetrannyporn's picture

Tell a few white lies and get a huge bonus? I see no reason not to.

Fri, 07/13/2012 - 10:25 | 2612796 Hmm...
Hmm...'s picture

Good post.  But it was so many words! I feel typically American and thus didn't read the post.  Too Lazy.  But I'll comment nonetheless: I think you could have simply had the title of:

Here Is What Happened The Last Time A Trader Was Caught Manipulating CDS Marks

and then had a picture of Scrooge McDuck diving into a pool of Gold.

Fri, 07/13/2012 - 10:27 | 2612799 GeneMarchbanks
GeneMarchbanks's picture

Kweku Adoboli's fault!!!

Clearly the rogue Nigerian is to blame.

Fri, 07/13/2012 - 10:39 | 2612805 LeBalance
LeBalance's picture

it seems to me that most folks on ZH understand the nature of the Faux market place and the nature of the illusory matrix.  so is continued participation done in a state of willful ignorance on the part of most?  i think not.  it is fear.

because the "status quo" is enforced by just that: force, it is with some trepidation that one comes to realise the stark choices that one could make pertaining to personal conduct under these circumstances.

does one knuckle under and walk blissfully through life with this knowledge acting just as other sheep and partaking in their/your experience?

or does one take one of the myriad of other pathways?

it is an interesting crossroads that one finds oneself confronted with.

/peace with being at war/

/war is discussion of differing value systems and experience levels/

/war is endless/

/the discussion continuous/

/likewise peace is endless/

Fri, 07/13/2012 - 10:40 | 2612855 Omen IV
Omen IV's picture

fear or arrogance?

Participation in the system today means you deserve to lose since you know so much is not real or legitimate  - there are trillions and trillions on the sidelines just for that reason - retail is dead so is so many other lines of distribution - governments buy their own debt directly or indirectly -because no one else will  

they will steal the money out of accounts if it is cash - extraction is the only game left

Fri, 07/13/2012 - 10:55 | 2612909 mick68
mick68's picture

I wholeheartedly agree and have done what little I can do, which isn't much but if everyone did what I did, the system would collapse. I simply pulled every dime I have from this faux paper ponzi scheme and drained my mutual funds as well.
These bastards don't get one iota of help from me!!

Fri, 07/13/2012 - 10:28 | 2612808 Bob
Bob's picture

Just remove the few bad apples and it's all good!

http://www.youtube.com/watch?v=Ci-UoSFfbtc

Fri, 07/13/2012 - 10:35 | 2612833 Cognitive Dissonance
Cognitive Dissonance's picture

"Braga, who is suing for unfair dismissal, was an inexperienced trader who was “thrown in at the deep end,” his lawyer, Amy Sander, said at the hearing."

So........are you saying that some of the Muppet masters are themselves patsies (aka Muppets) to even bigger in-house Muppet masters. Hilarious!

Can you say "Food Chain"?

Fri, 07/13/2012 - 10:42 | 2612865 LeBalance
LeBalance's picture

can you say "compartmentalized secure cut-outs?"

and since we know the model for government clearance in "security" (aka insecruity) biz, well....  lol

 

lol....how big is the lie?

how big do you want to think?

duality is endless.

Fri, 07/13/2012 - 11:37 | 2613065 Clycntct
Clycntct's picture

"lol....how big is the lie?

how big do you want to think?"

Nice!

Fri, 07/13/2012 - 10:55 | 2612905 AlaricBalth
AlaricBalth's picture

This is for you CD. It goes with your comment quite nicely.  :-)

http://www.mrxstitch.com/wp-content/uploads/2009/05/puppets-need-puppets...

Fri, 07/13/2012 - 11:01 | 2612929 Cognitive Dissonance
Cognitive Dissonance's picture

Nice. Very nice.

Muppets

Fri, 07/13/2012 - 11:36 | 2613058 NotApplicable
NotApplicable's picture

Otherwise known as "the fall puppet."

Fri, 07/13/2012 - 10:39 | 2612849 erheault
erheault's picture

Lets all gather at the Big board and shed a tear for all of the misunderstood Bankers after all they are all looking out for the workers.

Fri, 07/13/2012 - 10:44 | 2612872 LeBalance
LeBalance's picture

kumbaya My Bankster kumbaya

life is so hard on the Banksters kumbaya

it is so hard to do God's work kumbaya

oh Banksters kumbaya

Fri, 07/13/2012 - 10:42 | 2612859 Bogdog
Bogdog's picture

....checking my charts on Soylent Green futures.

Bullish!

Fri, 07/13/2012 - 10:42 | 2612860 semperfi
semperfi's picture

can we just get on with the hangings already !

Fri, 07/13/2012 - 10:48 | 2612890 LeBalance
LeBalance's picture

we stand on a teeter totter.

and as such we bear equal responsibility.

lashing out is not a lasting solution.

knowledge by all of all avoids these issues.

thus do you think that this "Earth" place will go away?

all of these beings will suddenly stop being willfully ignorant?

/maybe/  lol

Fri, 07/13/2012 - 10:45 | 2612862 Unholy Dalliance
Unholy Dalliance's picture

"…even though he shouldn't have had the authority to do so…"

Is this the journalism version of the hedging – as in hedging (thereby fudging) your story because you don't actually have [all] the facts? Shouldn't this read: '…even though he didn't have the authority to do so…'

If he shouldn't have had the authority but appeared to have it, as far as other staff were concerned, then to all intants and purposes, it seems as though he did have the authority, and it was accpeted by all that he did have said authority because no one seemed to question the fact that he had the afore-mentioned (you guessed it!) authority.

In other words, either he did or he didn't and shouldn't have had has no place in this piece of journalistic crap. I hope the author is reading this.

 

Jeeeeeez. 

Fri, 07/13/2012 - 10:47 | 2612883 MFL8240
MFL8240's picture

What are you missing??  Obama is in charge along with Eric Holder, criminals have nothing to fear if they work on Wall Street.  It is the white working stiff that has to fear the wrath of goverment with these clowns at the helm.  Both of these men loath white people and the idiot liberals will still vote for more of this hate.

Fri, 07/13/2012 - 11:10 | 2612961 Bob
Bob's picture

Sure, Wall Street is full of the coloreds, Home of homies. 

Hate?

Maybe.  https://en.wikipedia.org/wiki/Psychological_projection

Fri, 07/13/2012 - 10:48 | 2612889 yogibear
yogibear's picture

The big boys just re-direct the blame to a couple of fall-guys. It's been a green light with fraud for years. Just so many more fraudsters it's become crowded. Time to thin out the criminals and remove the small-time ones.

Fri, 07/13/2012 - 11:00 | 2612923 newworldorder
newworldorder's picture

JPM and Dimon are "made" - therefore untouchable as long as the FED is in power. Thats all you need to know.

Fri, 07/13/2012 - 11:10 | 2612963 Dapper Dan
Dapper Dan's picture

 And the markets rocket up?  notice they put atrocities in quotes?

 

Syria uprising

  White House says further 'atrocities' in Syria by Assad government should end any doubts on need for coordinated international response at UN - @Reuters
Fri, 07/13/2012 - 11:17 | 2612987 hedgeisforpussies
hedgeisforpussies's picture

its called marked to myth muppets

Fri, 07/13/2012 - 11:20 | 2612998 ak_khanna
ak_khanna's picture

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.

While executing their regular business if they do end up making a loss, their friends, the elected politicians are always there to bail them out with tax payers funds and even if that is not sufficient they can always borrow more. The debts taken in the name of the country will have to be borne by the rest of the population in the form of higher taxes and austerity measures.

Welcome to the new age democracy where we privatize the gains and socialize the losses for the elite and well connected.

http://www.marketoracle.co.uk/Article35345.html

Fri, 07/13/2012 - 11:26 | 2613019 Imminent Collapse
Imminent Collapse's picture

How long, has this been going on?

-Marvin Gaye-

Fri, 07/13/2012 - 11:36 | 2613057 cdskiller
cdskiller's picture

Isn't it beyond obvious by now? You can't just hold a couple of people accountable and think that will deter the criminal behavior when the environment in which that behavior occurred is still a secret casino. The secrecy must be eliminated. The casino must be converted into an open marketplace. The games that are allowed to be played in the new, open marketplace must be limited. The OTC derivatives market must be forcefully rendered insignificant. Credit default swaps must be killed, must become a thing of the past, one way or another. They were too insignificant to measure until very recently. The purpose they serve is not essential and the opportunity for crime they provide is too great.

Fri, 07/13/2012 - 11:40 | 2613075 realitybiter
realitybiter's picture

Michael Milken must shake his head, "I'm a freakin idiot!"


As part of his plea, Milken agreed to pay $200 million in fines. At the same time, he agreed to a settlement with the SEC in which he paid $400 million to investors who had been hurt by his actions. He also accepted a lifetime ban from any involvement in the securities industry. In a related civil lawsuit against Drexel he agreed to pay $500 million to Drexel's investors.[13][14] In total this means that he paid $1.1 billion for all lawsuits related to his actions while working at Drexel.

Critics of the government charge that the government indicted Milken's brother Lowell in order to put pressure on Milken to settle, a tactic condemned as unethical by some legal scholars. "I am troubled by - and other scholars are troubled by - the notion of putting relatives on the bargaining table," said Vivian Berger, a professor at Columbia University Law School, in a 1990 interview with the New York Times.[15] As part of the deal, the case against Lowell was dropped. Federal investigators also questioned some of Milken's relatives—including his aging grandfather—about their investments.[6]

At Milken's sentencing, Judge Kimba Wood told him:

You were willing to commit only crimes that were unlikely to be detected.... When a man of your power in the financial world... repeatedly conspires to violate, and violates, securities and tax business in order to achieve more power and wealth for himself... a significant prison term is required.[16]

Milken's sentence was later reduced to two years from ten; he served 22 months.[1]

[edit] 

Fri, 07/13/2012 - 11:54 | 2613124 Shizzmoney
Shizzmoney's picture

Reading this makes losing $2500 in Vegas feel ALOT better.

Fri, 07/13/2012 - 12:12 | 2613192 Turin Turambar
Turin Turambar's picture

Rope + Tree = Solution

Fri, 07/13/2012 - 12:27 | 2613237 fresno dan
fresno dan's picture

The FED: Credit is the Lifeblood of the economy

Goldman Vampire Squid Sachs:  We know, we know!!!!

The FED:  Thats why we are for the banks, of the banks, and by the banks!

Do NOT follow this link or you will be banned from the site!