Once upon a time, at JP Morgan’s London-based internal hedge fund CIO unit, a legend was born.
Bruno Iksil — better known as “The London Whale” or “Voldemort” or “He Who Must Not Be Named” — carved out his place in the annals of CDX trading history when a tail hedge gone wrong effectively forced him to sell massive amounts of protection on IG.9 back in Q1 of 2012.
Long story (and it is a very long story [5]) short, Iksil’s footprint in the market became so large that he was eventually picked off (or perhaps “harpooned” is more appropriate) by Boaz Weinstein (a legend in his own right) among others. One epic Jamie Dimon public relations blunder and several billion dollars later, and the world had learned a valuable lesson about what it means when a bulge bracket bank says it is “investing” excess deposits.
Needless to say, some people were curious to know who knew what and when (and who might have tried to cover up the mounting losses) in London and the legal proceedings with various former members of the team are ongoing, but given what we know about the generalized reluctance to prosecute white collar crime mistakes, it shouldn’t come as any surprise that Iksil, who is already off the hook in the US after going to UBS route [6], has been cleared in the UK. FT has the story [7]:
The UK financial watchdog has dropped its investigation of Bruno Iksil, the former JPMorgan trader known as the “London Whale” whose trades led to $6.2bn in losses, clearing him in the three-year probe.
The Financial Conduct Authority’s enforcement division sought to bring a civil action against Mr Iksil for failing to prevent or detect mismarking within JPMorgan’s chief investment office.
But its internal panel of independent experts, the Regulatory Decisions Committee, ruled that the watchdog did not have a strong enough case to proceed.
“We can confirm that the FCA will not be taking any further action,” the authority said.
Mr Iksil, who lives in France, has already avoided criminal charges in the US by striking an immunity deal with prosecutors there in exchange for his co-operation.
His lawyer, Michael Potts, at Byrne and Partners, said: ??“It is rare for the RDC to dismiss an FCA enforcement case at this very initial stage of the disciplinary process. Mr Iksil has fully co-operated throughout the FCA investigation and will continue to co-operate as a witness in the ongoing criminal and civil proceedings in the USA.”?
Julien Grout, a junior derivatives trader on the desk, and Mr Iksil’s former boss, Javier Martin-Artajo, who was a managing director at the bank, are both being prosecuted in the US for their roles in the affair. They deny wrongdoing. The FCA is not seeking to bring a case against either man.
The only person still being investigated by UK authorities in connection with the 2011 losses is Achilles Macris, who ran the London office of the bank’s chief investment office and oversaw its synthetic credit portfolio team. It was in that division where trades in credit derivatives ultimately led to the trading losses in 2012.
London-based executives in the CIO “deliberately misled” regulators examining the derivatives positions, “deliberately reassuring” officials that they were “simply” adjusting a hedging position while internally admitting to being “in crisis mode” over mounting losses, the regulators found.
And so, another episode of Wall Street's Costliest Gambles ends with the following familiar disclaimer: "No human traders were jailed or otherwise harmed in the making of this program."
But before you get angry just remember, it's only a "tempest in a teapot"...

