JPMorgan Says Its “Trading Venues” Are Under Investigation While It’s Still on Probation for Prior Trading Crimes

Gunnar Larson g at
Tue Feb 20 08:17:15 PST 2024

By Pam Martens and Russ Martens: February 20, 2024 ~

Jamie Dimon Sits in Front of Trading Monitor in his Office (Source -- 60
Minutes Interview, November 10, 2019)
Jamie Dimon Sits in Front of Trading Monitor in his Office (Source: 60
Minutes Interview, November 10, 2019)

Last Friday, ahead of a three-day weekend when bad news could be expected
to evaporate into the ether by the next news cycle, JPMorgan Chase dropped
a bombshell in its 10-K (annual report) filing with the Securities and
Exchange Commission. The bank, which has admitted to an unprecedented five
criminal felony counts since 2014, said its “trading venues” were under
investigation by three unnamed regulatory bodies.

This is a very serious matter for this particular bank because three of its
prior felony counts involved rigging markets. The bank admitted to rigging
foreign exchange markets in 2015 and to rigging, for more than eight years,
the precious metals and U.S. Treasury markets in an agreement with the U.S.
Department of Justice in September 2020.

Two of the precious metals traders involved in the 2020 case, Gregg Smith
and Michael Nowak, are sitting in federal prison today in Otisville, New
York. Smith, of Scarsdale, New York, was sentenced to two years in prison
and is scheduled for release on June 13, 2025. Nowak, of Montclair, New
Jersey, was sentenced to one year and one day. Nowak is scheduled for
release on July 30 of this year. Jamie Dimon, the Chairman and CEO of
JPMorgan Chase, whose tenure has seen an unprecedented crime wave at the
bank, received a $50 million bonus. (See our report: After JPMorgan Chase
Admits to Its 4th and 5th Felony Charge, Its Board Gives a $50 Million
Bonus to Its CEO, Jamie Dimon.)

In the 2020 criminal case, the bank was put on probation under a Deferred
Prosecution Agreement for three years, starting with the date the
“Information” (formal charging document) was filed. That document was filed
on the court docket in the U.S. District Court for the District of
Connecticut on September 29, 2020, meaning it should have expired on
September 29, 2023. But in JPMorgan’s Friday 10-K filing for the period
ending December 31, 2023, the bank states as follows:

“The Firm is subject to a Deferred Prosecution Agreement entered into with
the Department of Justice on September 29, 2020, relating to precious
metals and U.S. Treasuries markets investigations, as well as a cooperation
obligation under a related order issued by the CFTC [Commodity Futures
Trading Commission].”

Under the 2020 Deferred Prosecution Agreement, the U.S. Department of
Justice had the right to extend the probation period on the following
basis: “…in the event the Fraud Section and the Office determine, in their
sole discretion, that the Company or the Related Entities have knowingly
violated any provision of this Agreement or have failed to completely
perform or fulfill each of their obligations under this Agreement, an
extension or extensions of the Term may be imposed….”

The exact statement the bank made in its Friday filing with the SEC about
the current investigations of its “trading venues” is as follows:

“Trading Venues Investigations. The Firm has been responding to government
inquiries regarding its processes to inventory trading venues and confirm
the completeness of certain data fed to trade surveillance platforms. The
Firm self-identified that certain trading and order data through the CIB
[Corporate and Investment Bank] was not feeding into its trade surveillance
platforms. The Firm has completed enhancements to the CIB’s venue inventory
and data completeness controls, and other remediation is underway. The Firm
has also performed a review of the data not originally surveilled, which is
nearly complete, and has not identified any employee misconduct, harm to
clients or the market. While the identified gaps represent a fraction of
the overall activity across the CIB, the data gap on one venue, which
largely consisted of sponsored client access activity, was significant. The
Firm is dedicated to maintaining rigorous controls and continuously
enhancing the reliability of its trade infrastructure. The Firm expects to
enter into resolutions with two U.S. regulators that will require the Firm
to, among other things, complete its remediation, engage an independent
consultant, and pay aggregate civil penalties of approximately $350
million. The Firm is also in advanced negotiations with a third U.S.
regulator, but there is no assurance that such discussions will result in a
resolution. The Firm does not expect any disruption of service to clients
as a result of these resolutions.”

There are two key points to note about the above statement: (1) The bank
jumped the gun on waiting for its regulators to notify the public as to
just how helpful JPMorgan was in reporting the problem to regulators and
whether it, indeed, “self-identified” the problem as it claims. (This is,
after all, the bank that laundered money for Bernie Madoff for years
without filing the required Suspicious Activity Reports and is alleged by
the Attorney General of the U.S. Virgin Islands to have done the same thing
for sex trafficker Jeffrey Epstein. Self-reporting is not exactly Jamie
Dimon’s strong suit.) (2) The bank fails to specify the regulator that it
has not come to an agreement with. If that’s the criminal division of the
U.S. Department of Justice, that’s a big problem for a bank that is an
unrepentant recidivist.

Exactly which “trading venues” are under investigation for not properly
reporting trading activity is another dicey area for Jamie Dimon. In 2012,
the bank was investigated by the FBI for using deposits from its
federally-insured bank, JPMorgan Chase Bank, N.A., to make dangerous bets
in derivatives in London and lose $6.2 billion. The bank was not criminally
charged but suffered serious reputational damage. The U.S. Senate’s
Permanent Subcommittee on Investigations released a 300-page report on the
so-called “London Whale” case and held hearings. The bank paid its
regulators $920 million to settle the matter.

During Senate hearings on the case, the late Senator Carl Levin, Chair of
the Senate Permanent Subcommittee on Investigations, said JPMorgan Chase
“piled on risk, hid losses, disregarded risk limits, manipulated risk
models, dodged oversight, and misinformed the public.” The late Senator
John McCain, Co-Chair of the Subcommittee at the time, had this to say:

“This case represents another shameful demonstration of a bank engaged in
wildly risky behavior. The ‘London Whale’ incident matters to the federal
government because the traders at JPMorgan were making risky bets using
excess deposits, portions of which were federally insured. These excess
deposits should have been used to provide loans for main-street businesses.
Instead, JPMorgan used the money to bet on catastrophic risk.”

The woman overseeing these massive, risky trades for JPMorgan Chase, Ina
Drew, didn’t even have a trading license. (See Jamie Dimon’s Top Women and
Their Missing Licenses.)

JPMorgan’s Dark Pools should be part of this current investigation. Wall
Street On Parade has been questioning for years the legality of JPMorgan
Chase (and other Wall Street mega banks) trading their own stock-exchange
listed bank stock in their own Dark Pools. (See The SEC Is Allowing 5-Count
Felon JPMorgan Chase to Trade Its Own Bank Stock in its Own Dark Pools.)

Another bombshell that was included in last Friday’s 10-K filing by the
bank is that it had legal expenses in 2023 of an astounding $1.4 billion.
That was a 426 percent increase over its legal expenses in 2022.
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