Group of professionals discuss finance

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Banking and Finance Law Daily, December 22, 2015

JPMorgan agrees to $150M London Whale settlement

By Anne Sherry, J.D.

Following two years of discovery and mediation, JPMorgan and the victims of the London Whale scandal agreed to settle for $150 million, subject to court approval. The securities-fraud class action alleges that Jamie Dimon and Doug Braunstein understated the risks and losses arising from the London Whale’s trading activities (In re JPMorgan Chase & Co. Securities Litigation, December 18, 2015).

According to the allegations, a London-based trader in JPMorgan’s Chief Investment Office, rather than managing risks through hedging, conducted proprietary trading in a synthetic credit portfolio (SCP). When the size of the SCP positions triggered JPMorgan’s value at risk (VaR) limit, Dimon both temporarily increased the bank’s VaR limit and changed the model to instantly cut the VaR in half. After hedge funds and the media began to pick up on the resulting distortion in certain derivatives markets, Dimon, Braunstein, and CIO Ina Drew allegedly undertook a calculated public-relations strategy to comfort investors.

In May 2012, Dimon revealed the changes to the VaR model and admitted that the SCP had incurred $2 billion in losses and counting. The stock price fell from $40.74 to $32.51 in the following week and a half as the true extent of the losses emerged. One lead plaintiff, the Ohio Public Employees Retirement System, alone lost $2.5 million as a result of the alleged fraud at the bank. In a statement, the state said that all class members, including individuals, will be notified of their class status in the next few weeks.

The proposed plan to allocate the settlement fund takes into account the amounts by which JPMorgan’s stock price was inflated at various points and when an authorized claimant acquired and sold stock. The lead plaintiffs assert that the settlement provides for substantial, immediate monetary benefits and eliminates the risk that further litigation will lead to a smaller recovery or none at all.

The case is No. 12-cv-03852.

Attorneys: Daniel L. Berger (Grant & Eisenhofer P.A.), Salvatore Graziano (Bernstein Litowitz Berger & Grossman LLP), and David Kessler (Kessler Topaz Meltzer & Check LLP) for lead plaintffs and the class. Keith Ketterling (Stoll Stoll Berne Lokting & Shlachter P.C.) for the Oregon Public Employee Retirement Fund.

Companies: JPMorgan Chase & Co.

MainStory: TopStory SecuritiesDerivatives NewYorkNews OhioNews OregonNews

Banking and Finance Law Daily

Introducing Wolters Kluwer Banking and Finance Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.

A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.