JPMorgan Must Face Lawsuit, But Suit By Bank Employees Dismissed

JPMorgan Must Face Lawsuit, But Suit By Bank Employees Dismissed
Joe Mabel [CC BY-SA 3.0], via Wikimedia Commons

JPMorgan Chase & Co. (NYSE:JPM) is required to face a lawsuit brought by shareholders accusing it of masking risk in the so-called “London Whale” trade, but three individual executives will not face the suit.

The London Whale trade occurred in 2012 when JPMorgan’s Chief Investment Office lost $6.2 billion on a bet in illiquid SWAPs interest rate markets.  When hedge funds learned the firm must exit the trade, liquidity dried up and they were forced to liquidate their position at a loss.

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Two top executives and bank must answer to charges

US District Judge George Daniels in Manhattan determined that shareholders adequately alleged that the firm and two of its top executives – Chief Executive Officer Jamie Dimon and Chief Financial Officer Douglas Braunstein – misled investors about the bank’s risk, according to a report.  While pointing the finger at Dimon and Braunstein, the judge shielded Ina Drew, who supervised the Chief Investment Office and was accused of failing to supervise her employees; Mike Cavanagh, who preceded Braunstein as CFO, whose office was charged with understanding the financial depth of the situation; and Barry Zubrow, who had been the bank’s chief risk officer during both this period and the MF Global period.

Suit brought by JPMorgan employees dismissed

JPMorgan’s employees were none too happy over the failed trade.  A lawsuit by JPMorgan employees who had exposure to the bank’s stock in their retirement accounts was also dismissed.

In addition to dismissing related claims to former JPMorgan employees, the judge also dismissed a separate shareholder lawsuit against JPMorgan directors over the London Whale losses.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)

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