Javier Martin-Artajo and Julien Grout charged with four counts of falsification of books, wire fraud and making false statements to the US regulator
Two former London-based traders of JP Morgan have been charged by US prosecutors in the so-called 'London Whale' trading incident that cost the US bank more than $6bn (£3.9bn) last year.
Javier Martin-Artajo and Julien Grout were charged in the Southern District Court of New York with four counts of falsification of books, wire fraud and making false statements to the US regulator the Securities and Exchange Commission.
Bruno Iksil, the French-born trader dubbed the London Whale for his large trading position, is not being charged, according to documents issued by the US Department of Justice on Wednesday and sent to Iksil's lawyer on 20 June.
Lawyers for Martin-Artajo did not update a statement issued on Tuesday night in which they said he was "currently on a long planned vacation and will be returning to the UK as scheduled".
"Martin-Artajo has co-operated with every internal and external inquiry which was required of him in the UK. He received no communication from any governmental regulators, including the Financial Conduct Authority in the UK with whom he has fully co-operated, which would indicate that he should not be on vacation at this time," said his lawyers at Norton Rose Fulbright. Grout's lawyers are also reported to have said he has not committed any wrongdoing.
The prosecutors, led by US attorney Preet Bharara, said that JP Morgan had issued its results for the quarter ended 31 March 2012 on the basis of false and fraudulent information about the value of complex credit derivatives conducted by what is known as the chief investment office (CIO) of JP Morgan. Those results were later restated by $660m as a result of mis-valued trading positions, the prosecution alleges.
The prosecutors said that this CIO operation employed 100 people and that Martin-Artajo was head of credit and equity trading, working out of London but visiting New York. Iksil worked for him, as did Grout.
In the allegations about Grout, the prosecutors said that there was a "growing disparity" between valuations in their trading books and what the traders believed were the actual values. "This gap reached hundreds of millions of dollars by the end of March 2012," according to the allegations which cite email exchanges between employees.
The prosecutors said JP Morgan later discovered that 107 of 132 trading positions were marked in the books at more favourable prices than they should have been.
The losses have proved embarrassing for JP Morgan's chief executive Jamie Dimon, who had initially described concerns about the trading operations of the CIO has a "tempest in a teapot". But, once the extent of the losses emerged he apologised. His bonus was cut in half as a result and the bank conducted internal reviews into what happened. Its top bankers also appeared before the US Senate.
Dimon later admitted that "some of these mistakes obviously scared us".
