JPMORGAN CHASE WHALE TRADES: A CASE HISTORY OF DERIVATIVES RISKS AND ABUSES

(6) Mismarking Continued
130
When Ina Drew halted trading in the SCP book on March 23, the CIO personnel in
London continued to use more favorable prices than those at the midpoint to value the SCP’s
credit derivatives, although they also began reporting substantially more losses than previously.
On Monday, March 26, 2012, the CIO reported a daily loss for the SCP of $32 million and yearto-date
losses of $254 million. The next day, March 27, the CIO reported a $45 million loss, its
highest daily loss during the year to date. On March 28, the CIO reported a $51 million loss, and
on the day after that, a $50 million loss. Altogether, the SCP book lost $179 million in the first
four days of the week, and the year-to-date loss by then totaled $399 million. 739 JPMorgan
Chase told the Subcommittee that the CIO traders were apparently attempting to get the reported
losses closer to the actual losses in light of the upcoming end to the quarter. 740
The last day of the week was March 30, 2012, which was also the last business day of the
first quarter of the year. The marks at quarter-end are more important than on other days or
month-ends, because quarter-end information is included in various publicly filed financial
reports, and publicly traded corporations are required to attest to their accuracy. Within
JPMorgan Chase, month-end and quarter-end marks were also validated within each line of
business by an independent internal review team, the Valuation Control Group (VCG). 741
Ina Drew expressed concern about how the SCP would perform on the last day of the
month and how the day’s losses would affect the quarter as a whole. 742
Earlier in the month,
before she halted SCP trading, the CIO traders had engaged in a series of enormous trades,
involving $40 billion in credit derivatives, which dramatically increased the size of the portfolio
and which the OCC later characterized as “doubling down” on the book’s trading strategy. Due
739
See OCC spreadsheet, OCC-SPI-00000298, printed in a chart prepared by the Subcommittee above. Numbers do
not reflect restated P&L figures.
740
Subcommittee interview of Michael Cavanagh, JPMorgan Chase (12/12/2012).
741
5/10/2012 JPMorgan Chase Controllers special assessment of CIO’s marks, January to April 2012, JPM-CIO
0003637-654, at 642.
742
See 3/30/2012 email exchange between Irvin Goldman, CIO, and Javier Martin-Artajo, CIO, “Any better
numbers so far?,” JPM-CIO 0003564-565 (“No further progress on estimate yet. Will update you again in one
hour.” “As I mentioned to Keith, Ina wants a summary of breakdown when u have it bid offer attribution etc.”).
See also transcript of recorded telephone conversation between Irvin Goldman, CIO, and Javier Martin-Artajo, CIO,
JPM-CIO 0003555 and JPM-CIO-PSI-A 0000069 (“Mr. Goldman: “Ina just called me…she was curious if you
had any range of estimate about what the day is going to look like.” Mr. Martin-Artajo: I don’t have that yet,
unfortunately. I don’t have it Irv. I don’t have it. It is not looking good.” Mr. Goldman: “You still don’t know if
it’s minus 50 or minus 150?” Mr. Martin-Artajo: “I don’t know man. I have a bad feeling about bid-offer spread
here.” Mr. Goldman: “If we get what you are nervous about, where do you think it could be?” Mr. Martin-
Artajo: “It could be we have a very bad number, could have 150.”). See also 3/30/2012 email from Achilles
Macris, CIO, to Irvin Goldman, CIO, copies to Ina Drew, CIO, and others, “synthetic credit – crisis action plan,”
JPM-CIO-PSI 0001759-760, at 759 (Mr. Macris: “Just spoke to Ashley [Bacon] regarding the issue and he has
agreed to dedicate Olivier to help us with RWA targeting for Q2. …the objective is to determine what is the best
course of action to insure that the book is and remains balanced in risk and P+L terms. …clearly, we are in crisis
mode on this.” [Emphasis added.] ). See also 2013 JPMorgan Chase Task Force Report, at 51-53.