The Strategist

"London Whale" of JPMorgan Broke Four Years of Silence

02/23/2016 - 10:32

A former trader of JP Morgan Chase & Co. Bruno Michel Iksil, known as "London whale," broke a four-year silence and said he was not guilty of the bank’s multibillion-dollar losses. Mr. Iksil wrote this in a letter to various business media, including Bloomberg.

James Dimon, Chairman and Chief Executive Officer, JPMorgan Chase & Co - Remy Steinegger
James Dimon, Chairman and Chief Executive Officer, JPMorgan Chase & Co - Remy Steinegger
Iksil said that JPMorgan used him as a "scapegoat", placing him personally responsible for the loss incurred by the bank due to the trader's strategy in the financial market. Meanwhile, as Iksil notes, his actions received permanent approval of the management, which had repeatedly recommended that the trader should adhere the already developed strategy.

"London whale" says that in 2011, he warned the senior management of the risks associated with its strategy of investment transactions, but to no avail. At that, the former trader notes that the financial authorities’ decision not to bring him to justice is a proof of his innocence.

Iksil’s lawyers confirmed the letter’s authenticity. JPMorgan declined to comment on the former employee’s statements.

Recall that in 2012, JPMorgan's CEO Jamie Dimon reported a giant trading losses of $ 2 billion from operations of the trader, fascinated by risky transactions with derivatives. Mr. Dimon convened that the CDS strategy was "flawed, complex, poorly managed, poorly executed and poorly monitored."
The "rogue trader" was "London Whale", worked in the division Chief Investment Office since 2007. Iksil and his group managed securities portfolio worth about $ 350 billion, representing 15% of total assets.

According to financial media’s sources, Iksil had two junior traders in direct subordination, he lived in France, but had been working from the London office during the week, where was seen not in a suit, but in black jeans. The trader’s informal style did not interfere with an income about $ 100 million, which he brought JPMorgan annually.

Size of the loss of Iksil’s investment group is comparable to losing of another rogue trader, Kweku Adoboli, whose machinations resulted in about $ 2 billion wasted. The difference between Iksil and Adoboli’s actions is that operation of the latter were unauthorized. In turn, JPMorgan was aware about London whale’s transactions, which were curated by chief investment officer Ina Drew - top manager with annual compensation of $ 14 million and a distinguished 30-year career at the bank.

Iksil built his most successful investment strategies on the market fall. Right before the fail, he began selling insurance on the CDX IG 9 index, which includes 125 companies. At the same time, the majority of hedge funds relied on the rising cost of insurance. The game against the market had not gone unnoticed, and the players began to complain that London Whale’s position affected prices.