Shareholders of JPMorgan Chase have filed a class-action lawsuit against the bank, claiming that it transformed its chief investment office (CIO) into a risky trading desk.

JPMorgan Chase

Shareholders say the bank’s risk management unit at its chief investment office was supposed to manage risk, but instead it was used to generate profits for the bank. According to the suit, shareholders claim JPMorgan’s chief investment office became a hedge fund because managers were engaging in “speculative, high-risk bets designed to generate profits.”

Among the investors included in the class-action suit are the State of Oregon, the Arkansas Teacher Retirement System, and the Ohio Public Employees Retirement System. Any investors who purchased shares of JPMorgan Chase & Co. (NYSE:JPM) between Feb. 24, 2010 and May 21, 2012 are eligible to be involved in the suit.

One of the key decisions shareholders are targeting in the suit is the bank’s decision regarding Bruno Iksil, the so-called “London whale,” which reportedly lost them $6 billion. According to the claim, in 2010 JPMorgan Chase & Co. (NYSE:JPM) executives decided not to establish a liquidity reserve for Iksil’s portfolio, even though internal reports indicated that the bank needed between $2 billion and $4 billion in cash reserves, just in case the company had to sell his positions due to market conditions.

The complaint also alleges that since JPMorgan Chase & Co. (NYSE:JPM) did not take the liquidity reserve it was supposed to have taken, the bank’s net income was stated to be $2 billion over what it really was during the period named in the suit. Shareholders say that made the bank’s financial statements “materially false.”