Home ListingDecember 21, 2015

Pensions Strike $150M London Whale Settlement

The cash deal ends a three-year legal battle with JP Morgan following the bank’s $6.2 billion loss.

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A group of US and European pension funds have reached a $150 million settlement with JP Morgan relating to the so-called “London Whale” trading losses.

“We believe that the settlement represents an excellent recovery after more than three years of litigation.”Sweden’s AP7 alongside public pensions from Ohio, Arkansas, and Oregon made up the lead plaintiffs in the lawsuit, which was filed in 2012. The legal action followed the disclosure of losses exceeding $6.2 billion by JP Morgan’s chief investment office. The fraud—which involved former traders covering up losses on derivatives trades—eventually cost the bank almost $1 billion in fines from US and UK regulators.

“We believe that the settlement represents an excellent recovery… after more than three years of litigation,” said Richard Gröttheim, AP7’s CEO. “AP7’s involvement in this matter illustrates its continued commitment to represent the interests of investors.”

The pensions had claimed that JP Morgan and “certain of its officers” had made false and misleading statements regarding the chief investment office’s operations and the risk posed by the derivatives trading that ultimately caused the losses.

In addition, the complaint claimed these statements “caused the price of JP Morgan common stock to be artificially inflated,” said law firm Kessler Topaz Meltzer & Check—one of three law groups involved for the plaintiffs—in a statement. When the losses were disclosed, the bank’s stock price fell dramatically “causing damage to investors,” it added.

Announcing charges against two former JP Morgan traders in 2013, the US Securities and Exchange Commission (SEC) said Javier Martin-Artajo and Julien Grout “schemed to deliberately mismark hundreds of positions by maximizing their value instead of marking them at the mid-market prices that would reveal the losses.”

This caused the bank’s pre-tax income to be overstated by $660 million in the first quarter of 2012, according to the SEC.

The legal action against both men is ongoing, and both have denied the charges.

US authorities ceased their pursuit of Bruno Iksil, another “London Whale” trader, in 2013, while the UK’s Financial Conduct Authority dropped its case against him earlier this year.

The settlement adds to an expensive year for JP Morgan: In a separate announcement, on Friday the SEC said two of the bank’s wealth management subsidiaries had agreed to admit wrongdoing and pay $267 million after failing to disclose conflicts of interest to clients. JP Morgan Chase Bank also paid $40 million to the Commodity Futures Trading Commission in relation to the case.