JPM JP Morgan Chase and Co

By Lucy McNulty 

The Federal Reserve is considering legal action against Bruno Iksil, the trader at the center of the "London whale" trading debacle, according to a person familiar with the matter. Mr. Iksil had thought he would face no further threat of charges, the person said.

If the Fed takes action, Mr. Iksil could face a large legal bill, fines and a permanent ban from working in finance, according to the person.

Mr. Iksil found out about the possibility of action by the Fed in a January phone call with his lawyers, the person said.

A spokesman for the Fed declined to comment.

The former J.P. Morgan Chase & Co. trader, in his first interview in the almost five years since he shot to fame and garnered his nickname as part of the 2012 episode that led to $6.2 billion in losses for the largest U.S. bank, said he welcomed the latest potential legal twist. "I have to retrieve my reputation, my intellectual property and, simply, my life. So far, all of this has been stolen," the 49-year-old Mr. Iksil said in the interview with Financial News, conducted in Paris recently.

It is the only remaining threat of action facing the French trader, who came to prominence for his role buying positions for an enormous trading book at J.P. Morgan.

The trading losses occurred in the London operations of a unit within the bank called the Chief Investment Office, or CIO.

When The Wall Street Journal and Bloomberg News reported in April 2012 that Mr. Iksil's positions had grown to a dangerous size, J.P. Morgan Chief Executive James Dimon told investors the concerns were "a complete tempest in a teapot." The CEO didn't learn the full extent of the positions taken until later, J.P. Morgan has said.

After the size of the losses emerged, Mr. Dimon told Congress that his traders "did not have the requisite understanding of the risks they took" and apologized, while saying steps had been taken to enhance risk management.

J.P. Morgan eventually admitted wrongdoing and paid almost $1 billion in fines for securities-law violations tied to the losses.

The Fed has until the end of the month to press ahead with legal proceedings against Mr. Iksil. U.S. law prevents these starting more than five years after an alleged wrongdoing has occurred. The Fed's website says it can take enforcement action against individuals affiliated with banks it supervises for regulatory violations, unsound practices or breaches of fiduciary duty. It has brought one such enforcement action against an individual this year that barred the person from the banking industry, and there were seven last year that did so.

In July 2015, the U.K.'s Financial Conduct Authority took the unusual step of halting its investigation into Mr. Iksil's role in the J.P. Morgan losses. It was thought then that Mr. Iksil would face no further enforcement action. The trader had signed a nonprosecution deal with the U.S. Justice Department in 2013 and agreed to give evidence in proceedings against two of his colleagues. He also has been helping the U.S. Securities and Exchange Commission with its investigation into the London whale affair.

If the Fed pursues action against him, Mr. Iksil said he would take the chance to be heard.

"I have to fight," he said. "I have no choice...I have to make people be aware of what really happened."

Mr. Iksil has spent the past five years at home with his family in France, about 50 miles south of Paris, as a string of financial authorities in the U.K. and U.S. eventually decided not to press charges against him.

He said the "London whale" nickname unfairly turned him into the scapegoat for a much broader problem. He has since railed against the spotlight on him but said he is determined for his own view of the scandal to get a public hearing.

He told Financial News he was a pawn and that he tried to warn senior executives at J.P. Morgan of impending peril. But he was fired, his reputation was shredded and most of his multimillion-dollar compensation was clawed back, he said.

"I was public enemy No. 1," Mr. Iksil said. "Everyone, every single authority, everyone, I think, reading the press articles, wanted to behead me or destroy me or smash me."

Mr. Iksil said "a lot of people" have told him to move on, but he said that is impossible. To that end, he is writing a book about the affair. The latest draft includes his allegations that senior executives at J.P. Morgan should take more of the blame for the losses. He doesn't have a publishing contract.

He also has been pushing the SEC to make public the deposition he made in 2016. The SEC declined to comment.

"I've been waiting now for [almost five] years," he said. "I think it's time to say the things. The truth has to be told."

J.P. Morgan declined to comment.

Write to Lucy McNulty at Lucy.McNulty@dowjones.com

(END) Dow Jones Newswires

March 06, 2017 15:27 ET (20:27 GMT)

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