• Bank agreed to pay $150 million to end London Whale suit
  • Pension funds said high-risk trades hidden from investors

JPMorgan Chase & Co. won a judge’s approval to pay $150 million to settle investor claims that it hid as much as $6.2 million in losses caused by a trade dubbed the London Whale.

U.S. District Judge George Daniels in New York on Tuesday accepted the accord, which ended a suit brought by a group of pension funds in 2012. They accused JPMorgan of turning its London-based Chief Investment Office in London into a “secret hedge fund” that caused the losses.

The accord in the class-action suit “is adequate and reasonable,” the judge said.

The bank told investors that the office’s primary role was managing risk, but the lawsuit alleged it was instead engaging in risky trades to generate profits.

Ohio pension funds and other plaintiffs claimed they incurred tens of millions of dollars of losses because their fund managers were given false and misleading information. Bruno Iksil, who became known as the London Whale because he amassed large, market-moving positions in credit derivatives, made the trades for the bank.

High-Risk Trading

The most prominent activity allegedly carried out by the Chief Investment Office was “high-risk proprietary trading in an enormous portfolio of complex credit derivatives.” The bank “secretly used depositors’ money to engage in hedge fund-like trading, chasing huge windfall profits by wagering on defendants’ speculative views of the credit market,” according to court papers.

JPMorgan, which did not admit wrongdoing as part of the accord, was fined more than $1 billion by U.S. and U.K. regulators in 2013 for management failings in the case. The scandal erased as much as $51 billion of shareholder value and led to the departure of four senior managers, including the chief investment officer, Ina Drew.

Iksil, who agreed to cooperate in the U.S. investigation, hasn’t been charged with criminal wrongdoing. In February, he wrote a letter to Bloomberg News saying that he was “instructed repeatedly” by managers in the Chief Investment Office to execute the strategy that went awry.

He also wrote that he objects to being associated with the scandal and rejects assertions that the losses were the result of one person acting in an unauthorized manner. He said he doesn’t like the nickname “whale” either.

Iksil has agreed to testify for U.S. prosecutors against a more senior executive now in Spain and a junior trader now in France, who are both accused of hiding the extent of the losses from bank management. Neither has appeared in the U.S. to face the charges.

The case is In re JPMorgan Chase & Co. Securities Litigation, 12-cv-3852, U.S. District Court, Southern District of New York (Manhattan).

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