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

poor the SCP recordkeeping was, but also how quickly the portfolio was changing and how
imprecise existing systems are for valuing derivative positions. Ms. Drew told the
Subcommittee that she had become increasingly frustrated at the shifting numbers and capital
calculations at the SCP as the quarter drew to a close, which she felt made her look
“incompetent” for being unable to calculate the SCP’s RWA. 545
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The end result was that what had begun as a small, experimental portfolio in 2006, had
ballooned into a massive, high risk portfolio in 2012. In addition, by the end of March 2012, Mr.
Iksil had acquired so many long index instruments that the SCP – which had traditionally held a
net short position to provide protection against credit risks for the bank – had flipped and held a
546
net long position. In other words, overall, the SCP book held a long credit position at the
same time as the bank, instead of holding the opposite position as a hedge.
Ms. Drew told the Subcommittee that being long was “not terrible” given that the credit
market was rallying and short positions had lost so much value, but she conceded that the index
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positions were longer than necessary to “balance the book.” According to the CIO’s longtime
CFO, Joseph Bonocore, the SCP book had always held a net short position when he was there,
and he observed that a net long position could not serve as an effective hedge. 548 Mr. Martin-
Artajo told the JPMorgan Chase Task Force investigation that, while he believed that the long
position was necessary to stabilize the book, being long did not serve the mission of the SCP. 549
(4) Phones Down
On March 23, 2012, Ms. Drew ordered the CIO traders to “put phones down” and stop
trading. 550 According to Ms. Drew, she took that action during a video conference meeting with
CIO personnel in London attended by Mr. Macris, Mr. Martin-Artajo, Mr. Iksil, and other CIO
staff. 551 She explained that Mr. Martin-Artajo had told her that they were trading in the market
to “defend” their positions. 552 Ms. Drew said that he had told her that counterparties were
increasingly pushing the valuation of the positions, and by “defending,” CIO could push back. 553
545
Subcommittee interview of Ina Drew, CIO (12/11/2012).
546
See 4/5/2012 email from Ina Drew, CIO, to Jamie Dimon, JPMorgan Chase, and others, “CIO,” JPM-CIO-PSI
0000546 ; 4/16/2012 email from Joseph Sabatini, JPMorgan Chase, to Anna Iacucci, Federal Reserve, “materials for
Fed/OCC/FDIC call at noon today,” OCC-SPI-00009712; Subcommittee briefing by JPMorgan Chase (8/15/2012)
(Jeanette Boot and Harry Weiss); Subcommittee interviews of Ina Drew, CIO (9/7/2012), John Hogan, JPMorgan
Chase (9/4/2012), and Michael Kirk, OCC (8/22/2012); 2013 JPMorgan Chase Task Force Report, at 43 (quoting an
unnamed CIO trader, likely Bruno Iksil, saying on March 23: “[I] switched the book to long risk[.] [I] am done.”),
45 (indicating SCP had “assumed an overall net-long credit risk orientation”).
547
Subcommittee interview of Ina Drew, CIO (9/7/2012).
548
Subcommittee interview of Joseph Bonocore, CIO (9/11/2012).
549
JPMorgan Chase Task Force interview of Javier Martin-Artajo, CIO (partial readout to Subcommittee on
9/6/2012).
550
Subcommittee interviews of Ina Drew, CIO (9/7/2012) and Irvin Goldman, CIO (9/15/2012); JPMorgan Chase
Counsel interview of Bruno Iksil, CIO (partial readout to Subcommittee on 8/27/2012); 2013 JPMorgan Chase Task
Force Report, at 45.
551
Subcommittee interviews of Ina Drew (9/7/2012) and (12/11/2012).
552
Id.
553
Subcommittee interview of Ina Drew (12/11/2012). See also 6/29/2012 email from Elwyn Wong, OCC, to Scott
Waterhouse and others, OCC, “2nd Wilmer Hale Call,” OCC-SPI-00071386 (describing the traders’ actions in