Fed May Take Legal Action Against 'London Whale' -- Update
March 06 2017 - 3:42PM
Dow Jones News
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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