'London Whale' Sounded an Alarm on Risky BetsJ.P. Morgan Trader Alerted Bosses Before Losses Mounted; 'Scary' Size of Trading Positions
- Updated January 31, 2013, 11:55 p.m. ET
The apparent reservations of Bruno Iksil, who earned the nickname after making outsize wagers in debt markets, are among the details being examined by the Senate Permanent Subcommittee on Investigations, according to people familiar with the probe.
In one instance, Mr. Iksil told another trader that the size of his bets was getting "scary," according to emails in a Jan. 16 report by J.P. Morgan and to the people familiar with the emails.
Mr. Iksil's emails, according to people familiar with them, show there was concern within J.P. Morgan's chief investment office before Chief Executive James Dimon
dismissed as a "tempest in a teapot" reports on the whale trades, including an April 6 article in The Wall Street Journal
. The New York company first disclosed the trading losses in May, and Mr. Dimon subsequently said he was wrong to have played down concerns raised by the news report.
The panel, led by Sen. Carl Levin, D-Mich., also is looking into whether J.P. Morgan failed to disclose crucial information to its primary bank regulator, the Office of the Comptroller of the Currency, and whether the OCC failed to press the bank for details about how it managed its risks. The bank acknowledged previously that its information was wrong early in 2012.
The OCC prepared an assessment of its performance and shared it with the subcommittee, said people familiar with the OCC report. It isn't known if the subcommittee intends to release the OCC document. The subcommittee declined to comment.
Mr. Iksil kept trading early in 2012 even as he expressed doubts to his bosses, and managers didn't stop his trading until late March, the emails show, according to the people familiar with them.
Even Mr. Iksil didn't seem prepared for how heavy the losses eventually would become, according to the emails, suggesting that he, too, was surprised by the deep and sudden trading losses.
The Senate report is expected to offer details about the skepticism of Mr. Iksil, whose trades ultimately led to the losses and the departure of several executives and traders.
A J.P. Morgan spokesman said the company already has commented extensively on the matters in prior reports, one of which highlighted a trader's worries without naming the trader.
Emails reviewed by the subcommittee and J.P. Morgan show Mr. Iksil was worried about the trades as early as January 2012, according to the people familiar with them.
Mr. Iksil and another London trader, Javier Martin-Artajo, also suspected in early 2012 that other traders in a different part of J.P. Morgan leaked their positions to outside hedge funds and took opposing positions to those held by Mr. Iksil's group; both later communicated these suspicions to internal investigators, said people familiar with the case. News of the alleged leaks was reported this week by Reuters. Those concerns were conveyed to the U.S. Securities and Exchange Commission and the U.S. attorney's office for Southern District of New York, one of these people said.
J.P. Morgan, the U.S. attorney's office and the SEC declined to comment on those allegations.