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

83
2012, Mr. Iksil warned his supervisor that the SCP was a very visible player in a small market:
“[T]here is a trap that is building: if we limit the Mark-to-Market we risk increasing the notionals
further and weaken our position versus the rest of the market.” 530
Later, Mr. Iksil wrote to a
colleague:
“[I]t had to happen. [I]t started back in 2008 you see. [I] survived pretty well
until [I] was alone to be the target. [Y]es [I] mean the guys know my position
because [I] am too big for the market. … [B]ut here is the loss and it becomes
531
too large and this is it. [W]e realize that [I] am too visible.”
On March 20, 2012, CIO head Ina Drew and CIO Chief Risk Officer Irvin Goldman
participated in a meeting with the bankwide Directors Risk Policy Committee regarding the CIO,
and gave a presentation on the CIO’s investment portfolios and risk profile, but according to the
bank, did not disclose the SCP’s ongoing losses, risk limit breaches, increased portfolio size, or
532
increased RWA. On that same day, two CIO traders, Mr. Iksil and Mr. Grout, circulated the
daily profit-loss email for the SCP, estimating a daily loss of $43 million which was the largest
daily loss yet for the SCP, and also describing a $600 million to $800 million “lag” in the SCP
book. 533 Ms. Drew told the Subcommittee that she never read that email, 534
and even though it
was sent to multiple CIO recipients, no action was taken by any CIO manager to investigate the
enormous “lag” it described.
On March 21, Ms. Drew held a lengthy meeting with Mr. Macris and Mr. Martin-Artajo
on the SCP, in which they discussed the SCP’s “underperformance” and strategies to reduce its
535
RWA. According to Ms. Drew, she was not informed at that meeting about the SCP’s recent
acquisition of additional long positions, the $600 million to $800 million lag described in the
prior day’s email, or the traders’ use of more favorable derivative prices to minimize reported
SCP losses. 536
The next day, March 22, 2012, the CIO traders acquired still more long positions. As
recounted in the daily email explaining the SCP’s profit-loss status:
530
March 19, 2012 email from Bruno Iksil, CIO, to Javier Martin-Artajo and Julien Grout, CIO, “Core Book
analysis and proposed strategy,” JPM-CIO 0003476-477, at 477.
531
3/23/2012 instant messaging session between Bruno Iksil and Ade Adetayo, CIO, JPM-CIO 0001240-246.
532
See 2013 JPMorgan Chase Task Force Report, at 42-43, 88; 3/2012 “Directors Risk Policy Committee – CIO
2012 Opportunities and Challenges,” prepared by Ina Drew and Irvin Goldman, CIO, JPM-CIO-PSI 0015016.
533
See 3/20/2012 email from Julien Grout, CIO, to the CIO Estimated P&L mailing list, “CIO Core Credit P&L
Predict [20 Mar]: -$39,686k (dly) -$275,424k (ytd),” JPM-CIO-PSI 0016487-489, at 489 (explaining that that the
IG9 was “underperform[ing]” by $450 to $500 million; the iTraxx Main credit index was “lagging” by another $60
to $80 million; and the High Yield index had a $100 million “loss” plus another “lag” of $100 to $200 million,
concluding that the total “lag in P&L” was “material” and in the range of $600 to $800 million). For more
information about this email, see Chapter IV.
534
Subcommittee interview of Ina Drew, CIO (12/11/2012).
535
See 3/22/2012 email from Ina Drew, CIO, to Achilles Macris and Javier Martin-Artajo, CIO, “I was confused by
the inc[re]ased position noted today after yesterday’s exhaustive meeting,” JPM-CIO 0003492. For more about this
meeting, see Chapter IV.
536
Subcommittee interview of Ina Drew, CIO (12/11/2012). For more information on the traders’ pricing practices,
see Chapter IV.