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

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recast the CIO’s VaR-95 total, dropping it by 50% on the day it was put into place. 1618
Neither
the VaR model change nor its effect on the CIO’s VaR total was publicly disclosed at the time.
Several months later, on April 6, 2012, media reports disclosed for the first time that the
1619
CIO was engaged in large credit derivative trades. On April 11, 2012, when asked about the
CIO’s credit holdings, a JPMorgan Chase official, Sarah Youngwood, head of investor relations,
pointed an analyst to the CIO’s VaR:
Question: “Kush Goel – Neuberger (Buyside) . . . What was the specific credit
position discussed in the article; where are these derivatives disclosed? . . .
Answer: “CIO VaR is disclosed in the Market Risk section of the 10K with a
brief description of the activities . . . .” 1620
In other words, to assuage the analyst’s concern about the CIO’s large credit positions,
JPMorgan Chase directed him to the bank’s public disclosures regarding the CIO’s VaR
results in its 2011 Annual Report. Those results showed that the 2011 VaR total had
actually decreased from the prior year and indicated that the most the CIO had at risk was
$57 million, a relatively small sum in comparison to the bank’s total holdings.
Two days later, on April 13, 2012, JPMorgan Chase filed its Form 8-K with the SEC and
held its earnings call. 1621 In its 8-K filing, JPMorgan Chase included another chart, reprinted
below, reporting the VaR results for the CIO and Investment Bank. 1622
1618
Levin Office briefing by JPMorgan Chase (7/19/2012); ”CIO 10QVaR,” JPMC-Senate/Levin 000155 (decrease
of 50% from $132 million to $66 million on January 27, 2012).
1619
See “JPMorgan Trader’s Positions Said to Distort Credit Indexes,” Bloomberg, Stephanie Ruhle, Bradley
Keoun & Mary Childs (4/6/2012), http://www.bloomberg.com/news/2012-04-05/jpmorgan-trader-iksil-s-heft-issaid-to-distort-credit-indexes.html;
“‘London Whale’ Rattles Debt Market,” Wall Street Journal, Gregory
Zuckerman and Katy Burne (4/6/2012).
1620
4/11/2012 email from Sarah Youngwood, JPMorgan Chase, to Jamie Dimon and others, JPMorgan Chase, “CIO
articles – Calls (9),” JPM-CIO-PSI 0001093.
1621
4/13/2012 JPMorgan Chase & Co., Form 8-K,
http://files.shareholder.com/downloads/ONE/2063348229x0xS1193125-12-161533/19617/filing.pdf.
1622
Id. at 42.