JPM's London Whale May Face Jail Time For Mismarking Billions In CDS

Tyler Durden's picture

When first the speculation and subsequently the confirmation that in addition to suffering massive losses on its IG-9 position, JPM had engaged in massive, reckless and criminal CDS mismarking with the intent to defraud and to boost the appearance of profit for selfish reasons, we promptly concluded that "Jamie Dimon's "tempest in a teapot" just became a fully-formed, perfect storm which suddenly threatens his very position, and could potentially lead to billions more in losses for his firm." So far, the regulators which are currently on page two of "CDS for Absolutely Corrupt Criminal Morons", are only slowly catching up. And while the stench will eventually lead to Jamie, as what happened in the over the counter, unregulated CDS market has most certainly happened at the tens of trillions in other OTC products traded by JPM, most of which are IR swaps, tying it all back nicely to the Libor scandal of which JPM is also a part, the first person who will certainly experience some major pain as the JPM scapegoating plays out, is none other than the London Whale himself Bruno Iksil, who was loved by all at JPM when he was making money, and is now being hung out to dry, once the bank is in the prosecution's cross hairs.

From Reuters:

Bruno Iksil, a French citizen and a former London-based trader in JPMorgan Chase & Co's Chief Investment office, is under scrutiny for trades he made in an illiquid market for credit products that resulted in the bank's losses. Iksil became known in the derivatives market as the "London Whale" for the size of the positions he took.


U.S. federal investigators are looking at whether Iksil, who was fired in July, and his superiors deliberately mismarked the value of some of the trading positions to try to cover up the losses. JPMorgan is also conducting an internal probe.


The sources, who did not want to be identified because they were not authorized to talk about the investigation, said Iksil has also hired criminal defence lawyers in New York and Washington, D.C.

Bruno is not alone:

At least six people have retained lawyers in connection with the investigation. Iksil's supervisors, Javier Martin-Artajo and Achilles Macris, who were also fired by the bank in the wake of the losses, have attorneys in London and New York.


In addition to the CIO traders, the former head of the CIO office, Ina Drew, and two former risk officers, Peter Weiland and Irvin Goldman, have also hired lawyers.

And for all those wondering why all recent major crimes have London as a tipping point: Lehman, AIG, MF Global, UBS, JPM, the answer is very simple: jurisdiction.

Credit Suisse discovered that traders managing a portfolio of mortgage-backed securities had been inflating their numbers to make their group's profits look bigger and to hide losses in 2007, as the subprime mortgage crisis deepened.


In February, federal prosecutors announced charges against three people from Credit Suisse, two of whom pleaded guilty to conspiring to falsify the bank's accounts.


The third, Kareem Serageldin, a U.S. citizen living in London, was indicted in federal court in New York but has yet to come to the United States to face the charges. In recorded conversations he leaned on more junior traders to overstate the value of their securities, the indictment alleged.


If the Federal Bureau of Investigation, which is reviewing emails, phone records and witness statements about the CIO losses, finds evidence of fraud and criminal charges are brought, prosecutors could face some of the same hurdles in the JPMorgan case as they did with Credit Suisse traders.


Iksil's French citizenship complicates potential efforts to bring him to the U.S. for a trial. Witnesses whose cooperation may be crucial to the case will also have to come to New York to testify in the event of a trial.

Of course, even if he were to come to the US, Iksil hardly has much to worry about: after all that other Frenchman, Goldman's Fabrice Tourre who was found to magically be solely responsible for the firm's CDO fiasco, is not only still free, but technically receiving a Goldman salary.

In the meantime, if there is even one reputable regulator or enforcer left in the this banana republic, here is the bottom line: ignore JPM's CDS, and focus on its LIBOR-derived Interest Rate swaps, which too trade Over The Counter, and which like CDS will never trade on an exchange for one simple reason: it allows JPM to mark them at whatever prices it desires. Furthermore, with the objective pricing arbiter of all OTC products, MarkIt, being owned by the same banks that (ab)use it every day, the logical conclusion is that the $400+ million mismarking in JPM's CDS is orders of magnitude lower compared to what JPM is undoubtedly engaging in in other product verticals, namely IR swaps, where the bank has total exposure of $71 TRILLION in the OTC derivative market.

If regulators indeed care about restoring confidence to the market, and choose to be be proactive for once, instead of always reactive, forget Bruno, forget JPM's CDS exposure, and bust the firm where it indeed hurts - in tens of trillions in mismarked Futures, Options, Forwards and Swaps.

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camaro68ss's picture

lol no ones going to jail. whats a few billion between friends.

AlaricBalth's picture

London Whale is soon to become someones London Bitch.

And if Bruno want to have a more lenient sentence he needs to become the London Snitch.

bdc63's picture

Don't do the crime if you can't do the time*

* ex-Governors  and Goldman Sacs executives excluded, as usual

malikai's picture

<-- The Whale turns State

<-- The Whale has a most unfortunate accident in his hot tub

AlaricBalth's picture

January 16, 2013 (AP)

Bruno Iksil, the infamous JP Morgan trader known as the London Whale, was found dead yesterday in a shower stall at FDC New York while he was awaiting arraignment on 27 counts of securities violations. It had been rumored that he was cooperating with the FBI and the SEC in a federal investigation of JPM concerning the falsification of asset pricing. One Federal Marshal who wished to remain anonymous said, "I have never seen a body more brutalized and violated than this victim. Someone must have really wanted to send a message."
Mr Iksils former employer, JP Morgan, released this statement, "We are saddened by the event which occurred yesterday to Mr. Iksil. He was a valued employee and our prayers are with his family."
The SEC also released a statement today,"While we are aggrieved by the untimely death of Mr. Iksil, we are steadfast in our resolve that this investigation will move forward, as we continue to rid corruption from our capital markets."

AldousHuxley's picture

make banks private partnerships.


then let them blow up.


JP Morgan execs can waste all of their and rockfellers wealth and face the consequences.

pies_lancuchowy's picture

nice dream. Reality is, in 2013 Bruno will show us via Instagram how he ate a dinner at St Tropez and to make a practical joke he bought the entire place and then immediately left it as a tip before leaving for hookers

eatthebanksters's picture

Meanwhile Jamie, Jon Corzine and Holder are whiffing fat lines of pure Columbian flake off the loins of some young thing, laughing at the little people.

Omen IV's picture

Look for the sign of the Beast on his left inner thigh

Pladizow's picture

Unfortunately, Ron Paul has a better chance of being President then this guy has of going to jail!

Christoph830's picture

If that's the case, he better start digging his own London Ditch

StychoKiller's picture

Scapegoats, line up this way ----------------------------->

The Ignorati wanna see yer hornz before you go to the pokey!

Terminus C's picture

They will sacrifice a few of the lesser wolves so that the sheep can see that the wolves do, indeed, police themselves in the best interests of the sheep.

The feasting will continue on schedule.

Rainman's picture

yeah, the whale's just another minnow now. So it is written, King Dimon.

ACP's picture

But if he does go to jail...that'll teach him to commit financial crimes outside the US!

FRBNYrCROOKS's picture

a billion is a rounding error to does douche bags.

Offthebeach's picture

"Jail? Jail? I'm shocked, shocked I tell you. Jail is for muppets, commoners, financial cannon fodder, not for the likes of a Morgan man!!"
"This is a joke, right? Oh, that Jamme what a prankster! "
"Now Pshshaw little law man, I have a world to run and every thing in it."

tom a taxpayer's picture

Is plankton on jail menus? Even so, this whale has special dietary requirements, like Beluga caviar...

or rotten shark.



resurger's picture

Lets the games begin in 3, 2 , 1

slewie the pi-rat's picture

 <--<: thumbs down for brunoIskill!

 <--<: thumbs up for achillesMacRis!

Robot Traders Mom's picture

Couldn't happen to a nicer piece of shit...


Jlmadyson's picture

Ugh OT but ECB needed $14 billion in swaps from the Fed last week.


Big red button flashing in Benny Boy's office again.

Shadow banking system folding under collateral needs.

blunderdog's picture

Welp, if they DO decide to charge Iksil with a crime, that'd be kinda bad news in the long run.  If there's a crime in ripping people off by manipulating prices, that'd pretty much be the end of the rest of the still-functional US economy.

Schools, medicine, and entertainment.  Could throw in computer software, too, just for good measure.

Nothing but con-men and lies everywhere you look.

cougar_w's picture

Good point.

Here's what will happen to prevent that: The judge will get a visit from the knowledgable people at JPM and they will help him understand that allowing too broad a ruling on the matter would be -- bad. So he'll deliberately instruct the jury to limit discussions to persons of interest not incorporated. This will also mean that Iskil absolutely must be found guilty otherwise the interesting bits cannot happen in public. Then the judge will use wording that makes it 100% clear that any losses cause by unincorporated persons are punishable by the courts, Iskil hits the slammer, the public can dance in the streets at his expense, JPM keeps the money, the judge gets a beach house and a pre-paid virgin (his choice of gender) for the weekend, and everyone is happy.

blunderdog's picture

Ah, yes.  Adding the "more equal than others" clause.

Good call.

falak pema's picture

Oligarchical two tier justice is universal; like getting lice, only the poor or "marked to become poor" suffer from it. 

Iskil and Lance Armstrong, now both "marked" to be treated as lice infested.

You can hear the judge say : Its NOT the system, its them; go get them! 

HD's picture

Uh huh. I'll believe it when I see it. None of these assholes goes to jail.  If I took a penny from the leave a penny, take a penny jar and didn't report it as income - I'd be doing 5 to 10 for tax evasion. The TBTF traders have no concerns over such trivialities as what is "legal".

maxmad's picture

If regulators indeed care about restoring confidence to the market  


nuff said

ThisIsBob's picture

Absolutely the only "crime" here was losing money.  Off with his head!

Big Corked Boots's picture




Specifically, the crime is losing money from certain organizations.

JPM loses money = an attempt at justice.

MFG loses money = Corzine gets Obama re-elected.

Meesohaawnee's picture

He should have greased obama like Corzine did. you know the rules buddy

falak pema's picture

After Jerome Kerviel now this fall guy for the big boys; not that he is clean. But he aint the spider in the web.

Hank Paulson was; but he got a medal for it. 

Meesohaawnee's picture

squeel like a pig bruno..weeeeeeeeeeeeeeeeeeee

max2205's picture

Don't look now but Corzine is now the money market czar. Poof!

bob_dabolina's picture

haha. banker going to jail? good one.

Xibalba's picture

I'm sure that our friends at every other bank in the world who are mismarking assets are somehow not as guilty, right? 

slewie the pi-rat's picture

jamie:  after an extensive 16-month investigation we have determined beyond a reasonable doubt that the mis-marking of the shit, er, securities in question was due to a clerical error in data-entry by a msLindyGrin who was relatively new to our TBTF crime syndicate and a probationary employee many of whom, like her we have learned, are grrreat in bed!

once she made the mistake, she didn't realize it was there;  so she kept making it!  we use the same accountant as the CFTC used when they held off the MFGlobal BK for days, too!  so everything is on the level, ya see...?  we have people specially trained to not see multi-hundred-million-dollar checkbook mistakes and they had no trouble not seeing this, too!  b/c it takes 'a while' for the other banks to prove they didn't screw up, and we pay the accountants by the hour to not be able to think straight.  and that is for the record, too.  i had 150 lawyers approve this message!

speaking personally now, she felt horrible when she learned she had made a mistake b/c like all the jpMorgue employees, especially myself, she is very anal

we tried to give her a raise but when i personally requested her personnel file i was told she had left the company and she was not actually qualified to work for us b/c she was in the country illegally and is now safe inCabo, drinking her ass off with robo_T

she (allegedly) presented false papers when we hired her over 137 possibly-more-qualified applicants;  it is completely unclear how the choice to hire her was made;  but we have not stopped investigating.  trust me.  however her personnel file is a dead-end b/c somebody's dog ate it, before they could get it to me

but, she rilly did feel bad, according to all who knew her and they said she was a v.nice person, too;  they all think it coulda happened to anyone and we have signed, notarized affadavits from everyone to that effect...

[hey, if the FBI can "accidentally delete" all the bankster investigation files b/c some temporary help from foggyBottom made a "clerical error"...  why tf not..?]

lotsoffun's picture

slewie - you don't always express yourself well - but you get it.

so i'm in a bar in a bad usa metro area.  i live my coat on a chair and go for a pee.  when i come back, i see my coat leaving.

i run after the guy and grab him and i say 'hey' - that's my coat.

and mr. nice junkie says 'no  m.f. - you don't understand.  i worked hard for this coat.  i just stole it and now it's mine.  so what you gonna do m.f.'.

corzine is no different.  or any of the rest.  so really - what are you going to do?



slewie the pi-rat's picture

take my coat and my pack to the bathroom with me?

stay out bars in bad areas?

no bankster or broker takes advantage if you don't leave something around for them either

i feel sorry for you man

you can't take of yerself and you think i can't express myself too?

what a fukin loser!


alien-IQ's picture

I predict a single car accident on a lonely road or a hot tub related incident before he sees a courtroom.

slewie the pi-rat's picture



welding in the hot tub might be good here
especially with a bullet to the head too

right where that welding rod went into the skull there...

man!  that burnt hair smell form the welding rod always bothers me! 

this bloke was not at all as lucky as amyWinehouse, was he... ?

can you believe his balls exploded like that from the amperage?

what else do they want us to sign today? 

lotsoffun's picture

nothing is going to happen.  nothing.  he did no wrong.  he lost his job and his bonus - isn't that enough for you?  really, have some compassion.  don't you understand how embarrassing it is for him to go home to his family and tell them he was fired?

he and fabio are sitting in cannes right now and having some champagne and caviar and laughing at - you and me.

maybe corzine calls them for some tips.....



Bow Tie's picture

a whale in jail? has a nice rhyme to it. i still blamey jamie :)

DCFusor's picture

They can't take this too far.  Too many things come up if you try that.


If even one - just one - of the larger banks had an actual non-negative net worth, they'd be all over trying to get the FASB to force marking to market again, just for the advantage it would give them over their competitors.  That's really basic, no one ever mentions it - hidden in plain view.

I'd love to see someone mention that to say, Dimon or even Dick Bove - just to watch their faces.

I'm tired of laughing when someone says banks are cheap at half book or something like that.  No, they are trading as a non zero number, when the book is negative - still, when truly marked.

blunderdog's picture

But they have TONS of "assets."  It's just that no one's interested in figuring out how to "value" loans that won't be paid back.

This dovetails quite nicely with the US national debt, if you think about it.