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The London Whale

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The trader known as the London Whale lost at least $6.2 billion for JPMorgan Chase & Co. in 2012. That’s a lot of money until you remember that it didn’t stop the bank from earning a record profit of $21.3 billion the same year. The pain came elsewhere: Two former traders face criminal charges, the bank admitted violating securities laws and agreed to pay fines of more than $1 billion, a U.S. Senate subcommittee wrote a scathing report and the bank’s chief executive, Jamie Dimon, took a pay cut. The London Whale case drew a bigger reaction than other missteps by banks since the 2008 financial crisis, partly because of Dimon’s previous rock-star status. More importantly, it raised two worrisome questions: What if the banks are still addicted to risk? And what if regulators haven’t gotten better at spotting that?

Neither the Whale himself, Bruno Iksil, nor any senior managers faced criminal charges. (Iksil, who says the losses weren’t his fault, is cooperating with prosecutors.) Iksil’s former boss and a junior trader were indicted in 2013, but the charges weren’t about the trades themselves — U.S. prosecutors say the pair committed securities fraud by hiding the true extent of losses from bank management. Lawyers for both men, who remain in Europe, say they’re innocent. In April 2015, a Spanish court rejected the U.S. extradition request in the case of Iksil’s supervisor, Javier Martin-Artajo. The former head of Iksil’s division was fined $1.1 million for failing to be forthcoming with British regulators. At home, Dimon faced criticism in the Senate’s report, which said the bank misled investors and dodged regulators as losses mounted. In 2013, the bank reported the first quarterly  loss of his tenure, with results weighed down by $7.2 billion in legal costs, including a $100 million settlement with the Commodity Futures Trading Commission, which found that it had deployed a reckless trading strategy. In early 2016, the bank reached a tentative $150 million settlement of lawsuits filed by investors. Regulators faced criticism, too; the U.S. Federal Reserve’s Inspector General issued a report saying they had botched oversight of the JPMorgan unit where the losses took place.