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

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Mr. Iksil later indicated in an internal document that, by mid-February, he had sent Ms.
Drew his explanation of the ongoing losses, but JPMorgan Chase has been unable to provide a
copy of that explanation. Mr. Iksil also wrote around the same time that he was trying to reduce
RWA and VaR “as much as I can in a bleeding book.” 504
According to Mr. Iksil, he and Mr. Martin-Artajo discussed the trading strategy in
February. Mr. Iksil later told the JPMorgan Chase Task Force investigation that he had
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explained to Mr. Martin-Artajo that he did not want to add volume to the book, that is,
increase the overall size of the positions. In Mr. Iksil’s view, the losses would only be multiplied
by volume. 506 He indicated that Mr. Martin-Artajo responded that the book had to be “hedged
on high yield defaults.” 507 In that light, Mr. Iksil contended the only solution was to continue to
finance the acquisition of high yield default protection through the sale of investment grade
protection. 508
So he continued to purchase long credit instruments and collect the carry.
On February 28, Mr. Iksil wrote that there was “more bleeding,” and he had added
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approximately “[$]6-7 bln [billion] ig9 10yr” to the SCP book. On February 29, he indicated
that he had “sold important amounts of protection in ig9 10yr (close to 7bln all day ...),” and was
concerned it might breach a risk limit. 510 Altogether, according to Mr. Macris who oversaw the
SCP, the CIO traders added some $34 billion in notional value to the SCP book in January and
February 2012. 511
On February 29, 2012, senior CIO managers, including Ms. Drew, Mr. Wilmot, and Mr.
Goldman, participated in a regularly scheduled “business review” meeting with senior bank
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officials, including Mr. Dimon, Mr. Braunstein, and Mr. Hogan, to review CIO activities.
According to the JPMorgan Chase Task Force, CIO management discussed reducing the SCP’s
RWA, but did not disclose that the CIO was doing so by increasing the size and complexity of
the portfolio. 513
They also did not disclose that the SCP had incurred two straight months of
losses.
As the losses mounted in February, the CIO traders blamed each other and the market for
the inability of the trading strategy to staunch the losses. According to Mr. Iksil, he had told Ms.
504
Undated internal document authored by Bruno Iksil, CIO, with his personal notes and comments on SCP trading
activities from January to March 2012, JPM-CIO-PSI 00021891.
505
JPMorgan Chase Task Force interview of Bruno Iksil, CIO (partial readout to Subcommittee on 8/27/2012).
506
Id.
507
Id.
508
Id.
509
Undated internal document authored by Bruno Iksil, CIO, with his personal notes and comments on SCP trading
activities from January to March 2012, JPM-CIO-PSI 00021894.
510
2/29/2012 email from Bruno Iksil, CIO, to Javier Martin-Artajo, CIO, “Core credit book update”, JPM-CIO
0003443.
511
JPMorgan Chase Task Force interview of Achilles Macris, CIO (partial readout to Subcommittee on 8/28/2012).
See also 4/9/2012 email from Achilles Macris, CIO, to Douglas Braunstein, JPMorgan Chase, and Ina Drew, CIO,
“Synthetic Credit Presentation,” conveying presentation entitled “Core Credit P/L estimates for Q2,” at 22, JPM-
CIO-PSI-H 0002212; Subcommittee briefing by JPMorgan Chase (8/15/2012) (Jeanette Boot).
512
2/28/2012 email from John Wilmot, CIO, to Jamie Dimon, JPMorgan Chase, and others, “CIO Business Review
Materials,” JPM-CIO-PSI 0037408-452, at 410.
513
See 2013 JPMorgan Chase Task Force Report, at 37-38.