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October 17, 2013

J.P. Morgan Probe Shows Aggressive Moves as 'Whale' Losses Mounted

A Commodity Futures Trading Commission probe into J.P. Morgan Chase & Co.’s “London whale” trading debacle sheds new light on aggressive moves the bank’s traders used in 2012 to mitigate ballooning losses on billions of dollars in derivatives positions.

J.P. Morgan agreed to pay $100 million to settle the CFTC probe and admitted using recklessly manipulative trading strategies when it made giant bets that ultimately cost the bank $6.5 billion.

The agency’s complaint revealed new details about how the bank’s London office traded billions in derivatives, often during brief spurts, as losses piled up in its portfolio. The CFTC alleged J.P. Morgan’s traders compounded their trading errors by making huge bets to defend their faltering positions and, in the process, compiling even bigger stakes and exposing the bank to bigger losses.

The CFTC said it wasn’t recommending fraud charges against the traders—two of whom were indicted by a U.S. grand jury last month—because of the facts of the case and resource constraints.”

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Read full Wall Street Journal article here

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