JPMorgan Said to Reach Settlement in Whale Trade Probe

The bank is expected to pay about $100 million to resolve the CFTC's investigation of its botched derivatives bet.

JPMorgan Chase & Co. has agreed to pay about $100 million to resolve the Commodity Futures Trading Commission’s probe into the firm’s botched derivatives bets last year, according to people briefed on the matter.

The deal, which would bring the bank’s total settlements in the episode to more than $1 billion, may be announced as early as this week, the people said, asking not to be named because the talks were confidential. The accord would resolve a CFTC assertion that the trading amounted to a “manipulative device,” the people said. CFTC Chairman Gary Gensler and Joseph Evangelisti, a spokesman for the company, declined to comment.

JPMorgan agreed last month to pay $920 million to resolve related U.S. and U.K. probes into its internal controls and handling of the trades, which inflicted at least $6.2 billion in losses last year. The New York-based firm said at the time that the CFTC also threatened to bring a case. That inquiry had looked into whether the trades manipulated markets, a person with knowledge of the matter said then.

The accords don’t end all of the investigations of the transactions managed by Bruno Iksil, the Frenchman known as the London Whale because of the size of his bets. The Securities and Exchange Commission has said its inquiry remains open while the U.S. Justice Department runs a parallel probe. Iksil, who prosecutors have said is cooperating with their case, hasn’t been charged.

In April last year, Chief Executive Officer Jamie Dimon, 57, initially dismissed media reports that the derivatives bets were distorting markets, calling the attention a “tempest in a teapot.” The bank disclosed mounting losses a month later.

In an SEC settlement last month the bank admitted to oversight lapses and acknowledged it violated federal securities laws. The firm’s handling of the trades also has been faulted by Senate investigators, the U.S. Office of the Comptroller of the Currency, Federal Reserve and U.K. Financial Conduct Authority.

The CFTC’s civil settlement stipulates JPMorgan admit to wrongdoing on one day last year, one of the people said. While the CFTC may also reference other trades in its claims, JPMorgan wouldn’t admit or deny misconduct in those instances, the person said. The Wall Street Journal reported the settlement amount yesterday, and the New York Times reported the proposed admission.

JPMorgan has sought in the past few months to resolve probes into businesses including energy trading, credit-card lending and bundling of mortgages into bonds. The bank said last week it took a $7.2 billion charge for expenses tied to regulatory matters and litigation, leading to its first quarterly loss during Dimon’s tenure.

The firm has yet to resolve state and federal probes into its mortgage-bond sales, including a criminal inquiry. The company has been discussing a potential $11 billion deal with authorities looking into that business, a person with knowledge of the talks said last month.

 

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