US prosecutors have charged two former JP Morgan traders over the $6.2bn “London Whale” trading scandal.
The traders, Javier Martin-Artajo and Julien Grout, have been accused of attempting to manipulate the synthetic credit portfolio of JP Morgan’s chief investment office, which prosecutors say was an attempt to hide trading losses worth hundreds of millions of dollars.
Martin-Artajo oversaw the trading strategy at the bank’s chief investment office in London. Grout was a trader who worked for him, charged with marking the values of the trades in the group's books.
The two men both face charges of conspiracy, falsifying books and records, wire fraud, and causing false statements to be made to the US Securities and Exchange Commission.
Prosecutors said the extent of the manipulation was so bad that JP Morgan had reported false financial data for the first quarter of 2012.
It's understood that the "London Whale" at the centre of the scandal Bruno Iksil will not be charged, in return for his assistance to the FBI and federal prosecutors. Grout was Iksil's deputy and Martin-Artajo was his direct boss.
U.S. Attorney in non-prosecution agreement with Bruno Iksil in "London Whale" case. (1/2)— CNBC (@CNBC) August 14, 2013
Bruno Iksil will not be prosecuted for crimes related to improper valuation of securities. (2/2)— CNBC (@CNBC) August 14, 2013
JP Morgan's synthetic credit portfolio made over a billion dollars for the bank in 2009, the government said. To reach specified profit and loss objectives, it is alleged that Martin-Artajo and Grout faked the value of position marks in the portfolio.
The two may face up to 25 years' in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offences. Attorney Preet Bharara will hold a news conference on the charges later today.
The share price has remained healthy, up around 0.45 per cent.