Spain Rejects U.S. Extradition of London Whale Case Banker

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Javier Martin-Artajo, a former JPMorgan Chase & Co. trader, after attending an extradition hearing at the national court in Madrid, Spain, on Nov. 15, 2013.

Javier Martin-Artajo, a former JPMorgan Chase & Co. trader, after attending an extradition hearing at the national court in Madrid, Spain, on Nov. 15, 2013.

Photographer: Angel Navarrete/Bloomberg

A Spanish court rejected a U.S. request to extradite Javier Martin-Artajo, the former JPMorgan Chase & Co. banker accused of helping hide the London Whale’s trading losses surpassing $6.2 billion.

The court turned down the demand, backed by a Spanish prosecutor, because Martin-Artajo is a citizen of Spain and events occurred outside the U.S., the ruling sent Thursday shows. The tribunal said it won’t block the U.S. from pursuing the banker in Spain’s high court, while the prosecutor can appeal the decision.

“In the end a Spanish tribunal has accepted the arguments that we put forward,” Juan Barallat, Martin-Artajo’s lawyer said by phone. Martin-Artajo told judges at a hearing on March 5 that he was innocent.

The banker who oversaw trading strategy for the synthetic portfolio at the bank’s chief investment office in London, was accused by the U.S. of engaging in a securities fraud scheme along with Julien Grout, a trader at the firm. Federal prosecutors in New York say Martin-Artajo, who now lives in Spain, and Grout conspired to hide losses stemming from transactions by Bruno Iksil, the Frenchman at the center of the case who became known as the London Whale.

SCP Losses

The U.S. said Martin-Artajo and Grout manipulated and inflated the value of position markings in the synthetic credit portfolio, or SCP, in order to conceal their losses. At its most profitable point in 2009, the SCP produced more than $1 billion in revenue for JPMorgan, prosecutors in New York said.

Martin-Artajo directed the scheme to boost his chances for promotion and bonuses and delay a possible plan to move the portfolio to JPMorgan’s investment bank, prosecutors said. Grout was accused by the U.S. of participating with Martin-Artajo in the conspiracy to “curry favor with his supervisor and to enhance his apparent job performance.” Iksil meanwhile entered into a non-prosecution agreement with the U.S., and is cooperating with prosecutors as part of the deal.

U.S. lawyers for Grout, have said his client was “totally dependent” on Iksil’s instructions and expertise and has denied the charges.

Securities Fraud

Beginning in January 2012, the SCP began to lose money, Grout marked the positions and reported about $100 million in mark-to-market losses, the U.S. alleges. As the losses continued to mount, and under increasing scrutiny from senior JPMorgan executives, Martin-Artajo began to pressure Grout, his subordinate, to book the positions to show smaller losses, prosecutors allege.

At least one bank superior noticed the markings and instructed Martin-Artajo to “urgently reevaluate” the portfolio’s core position, prosecutors said. Martin-Artajo then pressured Grout and a second person to not report the losses and create a spreadsheet that would conceal the numbers and instead indicate gains, prosecutors said.

Iksil “repeatedly” warned Martin-Artajo not to continue the scheme to mis-mark the portfolio, saying it was “getting idiotic,” Manhattan U.S. Attorney Preet Bharara said when he announced the charges. The mis-marking practice continued into April 2012.

Martin-Artajo and Grout also later caused JPMorgan to make false filings of books and records with the Securities and Exchange Commission from March to May of 2012, regulators said in a parallel suit.

Both men face as long as 20 years in prison if convicted of securities fraud, the most serious charge. Lawyers for Grout, who is a French citizen, have said he’s in France.

At several hearings in the U.S., Marc Weinstein, Grout’s lawyer, and William Leone, Martin-Artajo’s attorney, have insisted their clients aren’t fugitives from the U.S. courts.

The cases are SEC v. Martin-Artajo, 13-cv-05677, and U.S. v. Martin-Artajo, 13-cr-00707, U.S. District Court, Southern District of New York (Manhattan).

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