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

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The following day, Javier Martin-Artajo, head of the CIO’s equity and credit trading
operations, wrote to Ms. Drew, describing how JPMorgan Chase’s response to the press articles
was successfully reducing market pressure:
“Ina, the market is quiet today. To[o] early to tell but so far about flat P/L
[profit/loss]. The tension has stopped now. The bank’s communications
yesterday are starting to work. I hope that it keeps this way tomorrow.” 1453
At the end of that day, the CIO reported a final loss total of only $6 million, compared to
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$415 million in losses the prior day, and $5 million the next day, which seemed to
confirm that the bank’s communications were calming the market.
The next day, April 13, 2012, one week after the initial news reports about the SCP,
JPMorgan Chase filed a Form 8-K with the SEC and held an earnings call with analysts,
investors, the media, and others to discuss its expected first quarter earnings. The bank’s filing
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and written materials did not address the SCP or the whale trades directly, but Mr. Braunstein
volunteered a number of comments about them during the earnings call.
On the call, Mr. Braunstein stated that he wanted to “talk about the topics in the news
around CIO, and just sort of take a step back and remind our investors about that activity and
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performance.” In his remarks, Mr. Braunstein described the CIO and its excess deposits
portfolio. He then went on to state:
“[W]e also need to manage the stress loss associated with that portfolio, and so
we have put on positions to manage for a significant stress event in Credit. We
have had that position on for many years and the activities that have been reported
in the paper are basically part of managing that stress loss position, which we
moderate and change over time depending upon our views as to what the risks are
for stress loss from credit.
All of those decisions are made on a very long-term basis. They are done to keep
the Company effectively balanced from a risk standpoint. We are very
comfortable with our positions as they are held today.
And I would add that all of those positions are fully transparent to the regulators.
They review them, have access to them at any point in time, get the information
on those positions on a regular and recurring basis as part of our normalized
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4/11/2012 email from Javier Martin-Artajo, CIO, to Ina Drew, CIO, “Single names CDS basis relative to IG 9
CDS – URGENT update,” JPM-CIO-PSI-H 0002340 (emphasis in original).
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See chart, prepared by the Subcommittee and printed in Chapter IV, tracking SCP’s daily reported profit and
loss (P&L) from January 3 to May 15, 2012, derived from an OCC spreadsheet, OCC-SPI-00000298-304, at 302.
Numbers do not reflect restated P&L figures after JPMorgan Chase’s restatement in July 2012. It is unclear whether
the CIO calculated these losses using midpoint prices or more favorable prices to minimize the total reported losses.
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The 8-K filing did, however, contain a chart tracking the CIO’s VaR totals, as discussed below. See 4/13/2012
JPMorgan Chase & Co., Form 8-K, at 42, http://files.shareholder.com/downloads/ONE/2063348229x0xS1193125-
12-161533/19617/filing.pdf.
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4/13/2012 “Edited Transcript JPM - Q1 JPMorgan Chase & Co. Earnings Conference Call,” at 7, JPM-CIO-PSI
0001151.