JPMorgan’s Federally-Insured Bank Is Fined $348 Million for Losing Track of “Billions” of Trades

Mon Mar 18 06:45:55 PDT 2024

https://wallstreetonparade.com/2024/03/jpmorgans-federally-insured-bank-is-fined-348-million-for-losing-track-of-billions-of-trades/

By Pam Martens and Russ Martens: March 18, 2024 ~

Jamie Dimon Sits in Front of Trading Monitor in his Office (Source -- 60
Minutes Interview, November 10, 2019)
Jamie Dimon Sits in Front of Trading Monitor in his Office (Source: 60
Minutes Interview, November 10, 2019)

On Thursday of last week, two of JPMorgan Chase Bank’s federal regulators
fined the riskiest bank in the United States $348 million dollars for
engaging in “unsafe and unsound banking practices” for failing to supervise
“billions” of trades on at least 30 global trading venues.

The Office of the Comptroller of the Currency (OCC) fined JPMorgan Chase
Bank $250 million while the Federal Reserve fined the bank $98.2 million.
The OCC said the misconduct occurred since at least 2019. The Fed said the
bank had engaged in the misconduct over the span of nine years, from 2014
to 2023.

The key outrage embedded in these charges – that mainstream media failed to
point out in its coverage last week – is that this “trading” activity did
not occur at the registered brokerage firm of JPMorgan, which has properly
licensed traders and trading supervisors. It occurred at the
federally-insured bank, which is not allowed to have licensed traders –
because casino banking brings on bank runs, bank panics and giant scandals
that undermine Americans’ confidence in federally-insured banks.

Under Jamie Dimon at the helm of this federally-insured bank, as both
Chairman and CEO, JPMorgan Chase Bank has turned giant scandals into an art
form. Its rap sheet reads like that of an organized crime family and
includes an unprecedented five criminal felony charges.

Just last year, its salacious activities with sex trafficker Jeffrey
Epstein, to whom it doled out mountains of hard cash for more than a decade
(which he then used to silence his underage victims and accomplices),
generated news headlines around the world. The bank settled those charges
last year, which had been brought in two civil lawsuits by his victims and
by the Attorney General of the U.S. Virgin Islands, for a combined $365
million. (See JPMorgan’s Settlements Reach $365 Million Over Civil Claims
It Banked Jeffrey Epstein’s Sex Trafficking of Minors; Criminal Charges
Could Lie Ahead.)

Adding to the outrage over the mild slap on the wrist from these two
regulators last week is that this federally-insured bank was previously
charged with engaging in unsafe and unsound banking activities when it used
depositors’ money from its federally-insured bank to engage in massive
high-risk credit derivative trades in London in 2012 and lost $6.2 billion
of depositors’ money. The case became infamously known as the London Whale
scandal.

The OCC wrote as follows in its settlement document covering the London
Whale matter in 2013:

“The credit derivatives trading activity constituted recklessly unsafe and
unsound practices, was part of a pattern of misconduct and resulted in more
than minimal loss, all within the meaning of 12 U.S.C. § 1818(i)(2)(B)”;
and “The Bank failed to ensure that significant information related to the
credit derivatives trading strategy and deficiencies identified in risk
management systems and controls was provided in a timely and appropriate
manner to OCC examiners.”

The Securities and Exchange Commission (SEC) also settled charges with the
bank in the London Whale matter. The SEC focused on JPMorgan’s ineffective
internal controls and failure to keep the Audit Committee of its Board
informed in a timely manner as required under its own rules and under the
Sarbanes-Oxley Act. The SEC also found the company violated securities laws
by filing false information with the SEC: “As a result of its failure to
maintain effective internal control over financial reporting as of March
31, 2012, and disclosure controls and procedures, and as a result of its
filing of inaccurate reports with the Commission (specifically, the Form
8-K filed on April 13, 2012, and the Form 10-Q filed on May 10, 2012),
JPMorgan violated Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the
Exchange Act and Rules 13a-11, 13a-13, and 13a-15 there under,” the SEC
said in its settlement document.

At the time of the London Whale scandal, a woman named Ina Drew was in
charge of the unit of the federally-insured bank that oversaw the
derivatives trading in London. That unit of the bank was called the Chief
Investment Office. (That unit was created after Jamie Dimon took the helm
at the bank.)

Ina Drew testified about the matter before the U.S. Senate’s Permanent
Subcommittee on Investigations on March 15, 2013. Drew told the hearing
panel that beginning in 1999, she “oversaw the management of the Company’s
core investment securities portfolio, the foreign-exchange hedging
portfolio, the mortgage servicing rights (MSR) hedging book, and a series
of other investment and hedging portfolios based in London, Hong Kong and
other foreign cities.”

Drew told the Senate Subcommittee that the investment securities portfolio
exceeded $500 billion during 2008 and 2009 and as of the first quarter of
2012 was $350 billion. But during the 13 years that Drew supervised massive
amounts of securities trading, she had neither a securities license nor a
principal’s license to supervise others who were trading securities.

At the time, we asked numerous Wall Street regulators to explain how this
is possible at Wall Street mega banks. One regulator who spoke on
background only told us that Drew could not hold a securities license
because she worked for the federally-insured bank, not its broker-dealer
(a/k/a brokerage firm). Only employees of broker-dealers are allowed to
hold securities licenses. But apparently, not having a securities license
does not stop one from supervising a $500 billion portfolio of securities
that are, most assuredly, traded by someone.

It is a long-held requirement by U.S. securities regulators that if you are
going to supervise persons holding a securities license, you must also hold
the appropriate securities licenses yourself. Drew, without a license, was
supervising traders in London who were registered with the Financial
Services Authority (now Financial Conduct Authority).

In its 10-K (annual report) filing in February with the SEC, JPMorgan Chase
indicated there is a third unnamed regulator that is currently
investigating these billions of unsupervised trades. The bank said it was
“also in advanced negotiations with a third U.S. regulator, but there is no
assurance that such discussions will result in a resolution.”

That third regulator should closely examine what is going on in JPMorgan’s
own Dark Pools, where the bank is preposterously allowed to trade large
amounts of its own bank stock in its own Dark Pools. (See chart below as an
example of what went on in the week of October 23, 2023.) Dark Pools are
thinly regulated trading platforms inside the mega banks on Wall Street,
and elsewhere, which lack the transparency of stock exchanges.

Dark Pool Trading in JPMorgan Chase Stock, Week of October 23, 2023