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

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Over the next few months, the value of the HY11 changed repeatedly, showing both
gains and losses. Mr. Iksil continued to build the CIO’s large short position, eventually spending
as much as $1 billion. 333
The accumulated index position became so large and the counterparty stakes so high,
they caught the attention of the press, which later reported on the standoff and reported that some
334
traders had referred to Mr. Iksil as a “caveman, for stubbornly pursuing the trade.” With just
six weeks left before the index expired, one hedge fund investor later said: “It seemed like the
trade of the century to be long the index,” 335 since the expectation was that the CIO’s bet would
fail and the long side would end up benefiting from both the premiums and final settlement
payments. But then, on November 29, 2011, American Airlines declared bankruptcy, 336
triggering a massive payout to the CIO and others holding the short side of the position.
337
Ina Drew told Jamie Dimon that the gains were about $400 million. The CIO traders
later claimed internally that they made $550 million, 338 but did not record the profits all on the
same day. 339 The key CIO trader, Bruno Iksil, later described the gains as “massive,” 340 while a
JPMorgan Chase internal report characterized them as a “windfall.” 341 JPMorgan Chase’s
internal auditors also referred to them as “windfall gains.” 342
Despite the drama and $400 million gain associated with the 2011 “caveman trade,” the
343
CIO’s revenues contributed only about 8% of JPMorgan Chase’s net income for 2011.
JPMorgan Chase senior risk managers told the Subcommittee that they had been unaware of the
2011 trades involving the SCP at the time. 344
The OCC told the Subcommittee that, while its examiners noticed the CIO’s $400 million
gain at the end of 2011, they did not look into its cause and were unaware of the 2011 SCP trades
333 See “From ‘Caveman’ to ‘Whale,’” Wall Street Journal, Gregory Zuckerman (5/17/2012),
http://online.wsj.com/article/SB10001424052702303879604577408621039204432.html. When asked to confirm
this figure, JPMorgan Chase told the Subcommittee that it was unable to confirm or deny it. Subcommittee briefing
by JPMorgan Chase (2/4/2013).
334 “From ‘Caveman’ to ‘Whale,’” Wall Street Journal, Gregory Zuckerman (5/17/2012); Subcommittee interview of
Doug McLaughlin, OCC (8/30/2012).
335 “From ‘Caveman’ to ‘Whale,’” Wall Street Journal, Gregory Zuckerman (5/17/2012).
336 See In re AMR Corporation, Case No. 11-15463 (SHL) (Bankr. SDNY), Voluntary petition for relief under
Chapter 11 (11/29/2011),
http://www.amrcaseinfo.com/maincase.php?start_dt=11/29/2011&end_dt=&start_no=&end_no=&desc=&prev_des
c=&sort=F&event_SEARCH=Y&range_start=&range_stop=.
337 See 4/5/2012 email from Ina Drew, JPMorgan Chase, to Jamie Dimon, JPMorgan Chase, and others, “CIO,”
JPM-CIO-PSI 0000539 (“The fourth quarter 400 million gain was the result of the unexpected American airlines
default.”).
338 JPMorgan Chase Task Force interview of Javier Martin-Artajo, CIO (partial readout to Subcommittee on
9/6/2012).
339 JPMorgan Chase Task Force interview of Bruno Iksil, CIO (partial readout to Subcommittee on 8/27/2012).
340 Id.
341 JPMorgan Corporate Sector Executive Management Report (Full Year 2011 Actuals), JPM-CIO-PSI 0018046 at
26.
342 2011 CA Quarterly Summary: Global Chief Investment Office 4 th Quarter CA summary,” OCC-SPI-00002483.
343 See FDIC presentation, “JPMC & COMPANY CIO Synthetic Credit Portfolio,” at 11, FDICPROD-0001783.
344 Subcommittee interview of John Hogan and Ashley Bacon, JPMorgan Chase (9/4/2012).