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U.S. To Drop 'London Whale' Charges -- WSJ

22 Jul 2017 6:32 am

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 22, 2017).
By Rebecca Davis O'Brien 

Federal prosecutors said they will drop charges against two former J.P. Morgan Chase & Co. traders at the center of the 2012 "London Whale" saga, ending the last U.S. criminal case against traders involved in a debacle that cost the New York bank more than $6 billion.

In filing to dismiss charges that it brought four years ago, the Manhattan U.S. Attorney's office on Friday cited a collapse in the credibility of a lead witness, Bruno Iksil, the former J.P. Morgan trader who came to be known as the London whale for his outsize trading positions. A lawyer for Mr. Iksil couldn't immediately be reached for comment Friday evening.

A spokesman for J.P. Morgan declined to comment.

Charges are to be dismissed against Javier Martin-Artajo and Julien Grout, who faced charges including conspiracy, wire fraud and securities fraud for their alleged role in a conspiracy to conceal losses sustained through a series of disastrous derivatives trades.

Law-enforcement officials brought charges in 2013 after probing whether traders in J.P. Morgan's chief investment office knowingly misvalued their positions to hide or understate losses as they piled up, according to people familiar with the investigations.

The two men, who no longer work at the bank, still face civil charges brought by the Securities and Exchange Commission.

A lawyer for Mr. Martin-Artajo declined to comment, citing the pending case with the SEC. Ed Little, a lawyer for Mr. Grout, said he and his client "are thrilled that after four long years of tough litigation, the government has finally decided to dismiss the case, and we thank them for their decency and professionalism."

U.S. prosecutors were among several regulatory and law-enforcement agencies trying to determine responsibility for the trading losses, which took place in a London outpost of the bank's chief investment office.

In 2013, J.P. Morgan agreed to pay at least $800 million in fines to settle claims by U.K. and U.S. regulators stemming from the bank's role in the trades.

Neither Mr. Martin-Artajo nor Mr. Grout ever appeared in a U.S. court to face the federal criminal charges. In April 2015, a Spanish court rejected prosecutors' request to extradite Mr. Martin-Artajo, who is a Spanish citizen. On Friday, the Manhattan U.S. Attorney's office said efforts to extradite Mr. Grout, a French citizen, from France "would have been futile."

The office said recent comments by Mr. Iksil led it to conclude it "no longer believes that it can rely on the testimony of Iksil in prosecuting this case, even if the defendants appeared."

Mr. Iksil -- who earned the nickname in the market for his outsize derivative positions before the losses came to light -- signed a nonprosecution agreement with the Justice Department in 2013 and agreed to give evidence against his two former colleagues. He had also been helping the SEC investigation.

In recent months, Mr. Iksil has spoken publicly about the case in the press, telling Financial News that he was writing a book and planned to launch a website to tell "the full story" of the trading scandal.

Earlier this year, the Federal Reserve chose not to go forward with legal action against Mr. Iksil for his role. He told The Wall Street Journal that the Fed's decision not to pursue the investigation made him "more determined than ever" to go public with his version of events.
-0- 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 22, 2017).
By Rebecca Davis O'Brien 

Federal prosecutors said they will drop charges against two former J.P. Morgan Chase & Co. traders at the center of the 2012 "London Whale" saga, ending the last U.S. criminal case against traders involved in a debacle that cost the New York bank more than $6 billion.

In filing to dismiss charges that it brought four years ago, the Manhattan U.S. Attorney's office on Friday cited a collapse in the credibility of a lead witness, Bruno Iksil, the former J.P. Morgan trader who came to be known as the London whale for his outsize trading positions. A lawyer for Mr. Iksil couldn't immediately be reached for comment Friday evening.

A spokesman for J.P. Morgan declined to comment.

Charges are to be dismissed against Javier Martin-Artajo and Julien Grout, who faced charges including conspiracy, wire fraud and securities fraud for their alleged role in a conspiracy to conceal losses sustained through a series of disastrous derivatives trades.

Law-enforcement officials brought charges in 2013 after probing whether traders in J.P. Morgan's chief investment office knowingly misvalued their positions to hide or understate losses as they piled up, according to people familiar with the investigations.

The two men, who no longer work at the bank, still face civil charges brought by the Securities and Exchange Commission.

A lawyer for Mr. Martin-Artajo declined to comment, citing the pending case with the SEC. Ed Little, a lawyer for Mr. Grout, said he and his client "are thrilled that after four long years of tough litigation, the government has finally decided to dismiss the case, and we thank them for their decency and professionalism."

U.S. prosecutors were among several regulatory and law-enforcement agencies trying to determine responsibility for the trading losses, which took place in a London outpost of the bank's chief investment office.

In 2013, J.P. Morgan agreed to pay at least $800 million in fines to settle claims by U.K. and U.S. regulators stemming from the bank's role in the trades.

Neither Mr. Martin-Artajo nor Mr. Grout ever appeared in a U.S. court to face the federal criminal charges. In April 2015, a Spanish court rejected prosecutors' request to extradite Mr. Martin-Artajo, who is a Spanish citizen. On Friday, the Manhattan U.S. Attorney's office said efforts to extradite Mr. Grout, a French citizen, from France "would have been futile."

The office said recent comments by Mr. Iksil led it to conclude it "no longer believes that it can rely on the testimony of Iksil in prosecuting this case, even if the defendants appeared."

Mr. Iksil -- who earned the nickname in the market for his outsize derivative positions before the losses came to light -- signed a nonprosecution agreement with the Justice Department in 2013 and agreed to give evidence against his two former colleagues. He had also been helping the SEC investigation.

In recent months, Mr. Iksil has spoken publicly about the case in the press, telling Financial News that he was writing a book and planned to launch a website to tell "the full story" of the trading scandal.

Earlier this year, the Federal Reserve chose not to go forward with legal action against Mr. Iksil for his role. He told The Wall Street Journal that the Fed's decision not to pursue the investigation made him "more determined than ever" to go public with his version of events.
 

(END) Dow Jones Newswires

July 22, 2017 02:32 ET (06:32 GMT)

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