Two former JPMorgan traders were indicted for engaging in a securities fraud to hide trading losses that eventually surpassed $6.2bn on wrong-way derivatives bets last year.
Bloomberg News reports that Javier Martin-Artajo, who oversaw trading strategy for the synthetic portfolio at the bank’s chief investment office in London, and Julien Grout, a trader who worked for him, were named in a federal indictment, which was unsealed yesterday in federal court in Manhattan.
The U.S. announced preliminary charges against the men in August.
Both were charged in Monday’s indictment with five criminal counts, including securities fraud, conspiracy, filing false books and records, wire fraud and making false filings with the U.S. Securities and Exchange Commission. The pair, along with unnamed co-conspirators, are accused of engaging in a scheme to manipulate and inflate the value of position markings in the synthetic credit portfolio, or SCP.
While the government says other unnamed co-conspirators acted with Martin-Artajo and Grout, the indictment describes 'Trader #2' and 'Trader #3' as JPMorgan employees who worked in London for Martin-Artajo at the Chief Investment Office. 'Trader #2' had the responsibility for marking the positions of the SCP when Grout was unavailable or out of the office, prosecutors alleged.
Beginning in January 2012, the SCP began to lose money so Grout marked the positions and reported about $100m in mark-to-market losses, the U.S. said in the indictment.
'Martin-Artajo claimed that this was what ‘New York’ -- that is, the bank’s senior management in New York - wanted, explaining that those JPMorgan officials did not want to see day-to-day market volatility', according to the indictment.
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