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JPMorgan agrees to $800 mln London Whale settlement


JPMorgan Chase (NYSE:JPM) has agreed to an $800 million settlement related to the London Whale trading scandal that resulted in more than $6 billion in losses, according to several media reports. 

The New York-based lender, embroiled in a series of legal headaches that could trigger billions of dollars in fines tied to its dealings leading up to the financial crisis, reportedly also agreed to admit to its mistakes, which would be a major precedent in a circle of increasingly watchful regulators. 

Any statement made would likely include an admission that the bank could have addressed the problem much sooner and that its lenient system of checks and balances allowed the London traders to build risky positions and hide their losses.

A formal indictment of two JPMorgan staffers, Javier Martin-Artajo and Julien Grout, was filed with the U.S. District Court in Manhattan on Monday, following criminal charges laid against them by the S.E.C. and federal prosecutors last month. The pair were charged with wire fraud, falsifying bank records and contributing to false regulatory filings.

Prosecutors chose not to charge a third trader, Bruno Iksil, who earned the moniker London Whale for the size of his trades, in exchange for his cooperation in the case against his former colleagues. 

The latest settlement figure is even greater than the $500 to $600 range penalty that the bank was previously estimated to pay as compensation for alleged manipulation of commodities markets. 

Aside from the SEC, the group of regulators involved in this case includes the Justice Department, Office of the Comptroller of the Currency and the U.K's Financial Conduct Authority. While involved initially, the Commodity Futures Trading Commission has opted out of the settlement, which could open the door to further action against JPMorgan down the road. 

Even as this case appears to wind to an end, JPMorgan still faces inquiries from several other federal agencies and two European nations. 

One is tied to an ongoing probe into Bernard Madoff‘s Ponzi scheme. According to New York Times sources, prosecutors and the F.B.I. are investigating whether JPMorgan failed to alert authorities about any suspicions of Madoff's activities. 

The Comptroller's Office and the Consumer Financial Protection Bureau are also mobilizing to slap the lender with a series of penalties and fines, in response to how JPMorgan handled its customers during the recession. Of the accusations hurled its way, the most costly centres around JPMorgan's alleged practise of luring credit card customers into buying products to protect them from identity theft, but with false promises attached. 

Adding to the list of post-crisis scrutiny is the SEC's examination of JPMorgan’s hiring practices in China. The agency is examining whether the bank hired the children of powerful Chinese officials so it could score lucrative business in the country.

Last month, the Department of Justice launched an investigation over JPMorgan's sale of mortgage-backed securities to Fannie May and Freddie Mac ahead of the financial crisis.

In late July, JPMorgan agreed to a $410 million settlement after one of the bank's energy subsidiaries got into hot water over power plant electricity bids in California and the U.S. Midwest.

Shares of JPMorgan rose 13 cents to $53.27 on Tuesday. 

Quick facts: JPMorgan Chase & Co

Price: 119.74 USD

Market: NYSE
Market Cap: $364.99 billion

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