JPMorgan Chase & Co (NYSE:JPM) has reached a preliminary agreement with CFTC admitting wrongdoing and paying $100 million to settle ‘London Whale’ case.
New York Times’ Ben Protess and Jessica Silver-Greenberg report JPMorgan could settle with the Commodities Futures Trading Commission as soon as this week.
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JPMorgan’s settlement with SEC
Last month, JPMorgan Chase & Co (NYSE:JPM) was ordered to pay $920 million in fines for misconduct in the infamous London Whale scandal to government authorities in Washington and London, which would close various investigations over the multi-billion trading error scandal suffered by the bank last year. Authorities involved in the probe include the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve and the Financial Conduct Authority in London.
JPMorgan Chase & Co (NYSE:JPM) suffered a loss due to big derivative wagers in the chief investment office of the bank in London. The incident also gave JPMorgan a tainted reputation for being a bank with poor risk handling capability. After the incident, JPMorgan faced various investigations and probes.
CFTC probes actual trading practices
According to Ben Protess and Jessica Silver-Greenberg of The New York Times, unlike SEC’s settlement last month, CFTC zeroes in on JPMorgan Chase & Co (NYSE:JPM)’s actual trading practices. Armed with new authority under the Dodd-Frank Act of 2010, the CFTC argues that JP Morgan’s trading was so large and voluminous that it violated a law preventing banks from recklessly using a ‘manipulative device’ in the market for credit derivatives, financial contracts that let the bank bet on the health of companies like American Airlines.
JPMorgan admits wrongdoing
Citing people familiar with the matter, The New York Times reports JPMorgan Chase & Co (NYSE:JPM) has reached a rare preliminary agreement to admit that the trading blowup itself represented reckless behavior. According to authors Ben Protess and Jessica Silver-Greenberg, this admission marks the most aggressive step in reversing a decades-long practice of allowing banks to ‘neither admit nor deny’ wrongdoing. When Mary Jo White took over the SEC recently, she outlined a new policy to extract admissions in certain cases. This admission by JPMorgan could create a precedent for pursuing other admissions in Wall Street cases.
JPMorgan Chase & Co (NYSE:JPM)’s deal with CFTC would bring the bank’s total settlements in the episode to over $1 billion.