JP Morgan Chase

JPMorgan and Institutional Investors Agree to $4.5B Mortgage-Backed Securities Settlement

Published on: November 14, 2013 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase & Co. (JPM) says it will pay $4.5 billion to investors for losses that they sustained from mortgage-backed securities that were purchased from the firm and its Bear Stearns Cos. during the economic crisis. The institutional investors include Allianz SE (AZSEY), BlackRock Inc. (BLK), Pacific Investment Management Group, MetLife Inc. (MET), Goldman Sachs Asset Management LP, Western Asset Management Co., and 16 of other known institutional entities. This is the same group that settled their MBS fraud case against Bank of America Corp. (BAC) for $8.5 billion.

The $4.5 billion will be given to 330 RMBS trusts’ trustees over investments that were sold by the two financial institutions between 2005 and 2008. A number of the trustees, including Bank of New York Mellon Corp. (BK) still have to approve the agreement, as does a court.

Still, the claims related to the Washington Mutual-sold MBS have yet to be resolved.

JPMorgan’s Admission to CFTC of “Reckless” Trading Could Lead to More Securities Fraud Cases

Published on: November 4, 2013 | by Shepherd Smith Edwards & Kantas, LLP

According to one brokerage executive who spoke with Advisen, JPMorgan Chase & CO.’s (JPM) admission to the Commodities Futures Trading Commission when settling securities allegations over its London Whale debacle that it engaged in “reckless” trading could get the financial firm into more legal trouble with investors.

The CFTC implied that because of certain “manipulative” actions, JPMorgan managed to sell $7B in derivatives in one day, including $4.6 billion in three hours. That the term “manipulate” was used could prove useful to plaintiffs (The regulator also accused the firm of using manipulative device related to credit default swaps trading, which violated a Dodd-Frank provision prohibiting such behavior). JPMorgan will pay $100 million to settle the securities fraud cause with the agency.

With the Securities and Exchange Commission also now seeking to obtain admission of wrongdoing from defendants in certain instances, such acknowledgments to regulators could impact firm’s insurance coverage terms. Right now, standard directors and officers coverage policies exclude personal profiting, fraud, and other illegal conduct. Admissions of fraud, however, could nullify such policies.

Is JPMorgan on the Verge of Settling A $5.75 Billion Mortgage-Backed Securities Case Filed by BlackRock & Neuberger Berman Group?

Published on: October 29, 2013 | by Shepherd Smith Edwards & Kantas, LLP

After its tentative $13 billion residential mortgage-backed securities settlement with the US Department of Justice, now JPMorgan Chase & Co (JPM) looks like it could be getting ready to settle yet another MBS fraud case, this time with bondholders, such as Neuberger Berman Group LLC, Allianz SE’s Pacific Investment Management, and BlackRock Inc. (BLK). Investors want at least $5.75 billion dollars.

The group of over a dozen bondholders already had reached a settlement in 2011 in an $8.5 billion mortgage-backed securities case against Bank of America Corp (BAC) over similar allegations. Now, the institutional investors want restitution over bonds that JPMorgan sold—those from the firm itself and also from Washington Mutual (WAMUQ) and Bear Stearns (BSC).

JPMorgan has been settling a lot of securities cases lately. Its $13B RMBS deal with the DOJ resolves a number of matters, including Federal Housing Finance Agency claims for $4 billion. The FHFA believes that J.P. Morgan gave Fannie Mae (FNMA) and Freddie Mac (FMCC) inaccurate information about the quality of the loans they bought from the bank ahead of the decline of the economy in 2008. $5 billion of the proposed RMBS settlement is for penalties and the remaining $4 billion is for the relief of consumers.

JPMorgan Considers $11B Mortgage-Backed Securities Settlement

Published on: September 26, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Now that US Attorney General Eric Holder has turned down JPMorgan Chase’s (JPM) offer to settle criminal and civil charges related a mortgage-backed securities probe, the financial firm is looking at a settlement of possibly $11 billion. The financial figure has gone up as talks have expanded to include additional cases with more regulators.

The MBS investigations are over residential mortgage-backed securities (RMBS) that JPMorgan, Washington Mutual (WAMUQ), and Bear Stearns (BSC) issued between 2005 and 2007. Authorities have been looking into whether JPMorgan, which the other two firms acquired during the financial crisis, misled investors of the quality of the mortgages that were backing the securities. A lot of these RMBS failed as housing prices dropped. JPMorgan says that Washington Mutual and Bear Stearns issued about 70% of these RMBS.

One possible settlement could include $4 billion in relief to consumers and a $7 billion penalty. However, according to sources familiar with the settlement talks, the two sides have not come close to agreeing on the figure and the amount could change.

JPMorgan to Pay $920M to Settle London Whale Debacle & $80M Over Credit-Card Practice Allegations

Published on: September 19, 2013 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase (JPM) has agreed to pay a $920 million fine to resolve securities fraud investigations conducted by the Federal Reserve, the Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Financial Conduct Authority in London. The probes were related to the multibillion-dollar trading losses the bank is blamed for in last year’s London Whale debacle.

The regulators cited JPMorgan for “deficiencies” related to controls assessments, risk oversight, and internal financial reporting. The bank’s senior management is getting the brunt of the blame for purportedly not citing concerns about the losses to the board. However, no charges have been filed in this case against any executive.

Also, the SEC was able to extract an acknowledgement from JPMorgan that it was in violation of federal securities laws over this matter. This comes in the wake of the regulator’s decision to reverse its policy that previously let banks settle without having to deny or admit to having done anything wrong.

JPMorgan Could Settle “London Whale” Fiasco for $800M

Published on: September 17, 2013 | by Shepherd Smith Edwards & Kantas, LLP

According to a source knowledgeable about negotiations, JPMorgan Chase & Co. (JPM) could pay at $800 million in penalties in the investigations conducted by regulators over the “London Whale” trading scandal. The regulators are the Federal Reserve, the Securities and Exchange Commission, the British Financial Conduct Authority, and the US Office of the Comptroller Currency. The announcement of the settlement is expected shortly.

The trading fiasco involved JPMorgan trading in complex derivatives, which were amassed by a trader who was dubbed the London Whale. Traders are accused of betting on credit derivatives, which let them wager on the supposed health of certain companies. Authorities contend that when the positions began to go bad, the traders valued them in a way that was too positive. The trades would cost the financial firm over $600 billion.

Following the debacle, the bank said that it made changes to internal controls. JPMorgan maintains that it was the one that detected the traders’ questionable activities and notified the authorities.

JPMorgan Found Liable in Billionaire’s Subprime Mortgage Lawsuit for Over $50M in Damages

Published on: August 28, 2013 | by Shepherd Smith Edwards & Kantas, LLP

In the State Supreme Court in Manhattan, Justice Melvin Schweitzer found JPMorgan Chase (JPM) liable for breach of contract when it put high-risk subprime mortgages in an account held by investor Leonard Blavatnik. Now, the financial firm must pay the Russsian-American billionaire more than $50 million in damages–$42.5 million for the breach and 5% interest from beginning May 2008. However, JPMorgan was not found liable for negligence.

Blavatnik, who Forbes magazine says is the 44th wealthiest person in the world, filed his securities fraud case against JPMorgan in 2009. He contended that the investment bank lost over $100 million on about a $1 billion investment made by CMMF L.L.C., which is a fund that Access Industries, his company, created. He says JPMorgan promised him that the money would be invested conservatively but instead breached a 20% mortgage-backed securities limit when it misclassified securities that were backed by a subprime loans pool—ABS home-equity loans—as asset-backed instead of as MBSs.

Access, Blavatnik’s company, claims that the bank kept holding the securities even though it knew that they were not right for the portfolio. In May 2008, CMMF shut down the account.

Ex-JPMorgan Traders Get Criminal Charges Over the Allegedly Fraudulently Inflating Investments’ Value to Hide Massive Trading Losses

Published on: August 23, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Earlier this month our securities law firm reported that the US Department of Justice was planning to bring criminal charges against Julien Grout and Javier Martin-Artajo, two ex-JPMorgan Chase & Co. (JPM) trading specialties. The charges, including conspiracy, wire fraud, falsification of books and records, and falsification of SEC records, now have been filed. The government contends that they conspired to conceal huge trading losses and made false statements to regulators.

According to U.S. Attorney Preet Bharara, the men purposely lied about the “fair value of billions of dollars in assets” on the firm’s books to conceal massive losses that continued to grow each month. He says that the trading losses would eventually total over $6 billion and involved credit default swaps and other synthetic derivative products.

The portfolio had tripled in worth to about $157 billion in net national positions between 2011 and 2012, and JPMorgan made about $2 billion in profits from 2006 through 2012. But when traders began to take large derivative positions, there were big financial losses and the portfolio began to lose money—over $185 million between January and February of 2012 alone.

Bank of America, JPMorgan Chase Among Banks Sued by Danish Pension Funds in Credit Default Swaps Lawsuit

Published on: August 15, 2013 | by Shepherd Smith Edwards & Kantas, LLP

In U.S. District Court for the Northern District of Illinois, Danish pension funds (and their investment manager) Unipension Fondsmaeglerselskab, MP Pension-Pensionskassen for Magistre & Psykologer, Arkitekternes Pensionskasse, and Pensionskassen for Jordbrugsakademikere & Dyrlaeger are suing 12 banks accusing them of conspiring to take charge of access and pricing in the credit derivatives markets. They are claiming antitrust violations while contending that the defendants acted unreasonably to hold back competitors in the credit default swaps market.

The funds believe that the harm suffered by investors as a result was “tens of billions of dollars” worth. They want monetary damages and injunctive relief.

According to the Danish pension funds’ credit default swaps case, the defendants inflated profits by taking control of intellectual property rights in the CDS market, blocking would-be exchanges’ entry, and limiting client access to credit-default-swaps prices, and

US Will Likely Arrest Two Ex-JPMorgan Chase Employees Over Trading Losses Related to the London Whale Debacle

Published on: August 10, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The United States Government is expected to announce criminal charges against two ex-JPMorgan Chase & Co. (JPM) employees over allegations that they tried to cover up trading losses last year related to the London Whale fiasco. The ex-employees are Javier Martin-Artajo, the executive who was in charge of supervising the trading strategy, and Julien Grout, a trader that worked under him. Prosecutors also may impose penalties on the investment bank over this matter.

The securities fraud allegations stem from a probe into whether JPMorgan employees at its London offices tried to inflate certain trades’ values on the banks’ books, and charges could be filed over the falsification of documents and the mismarking of books. The criminal probe also has looked at whether the firm’s London traders engaged in the type of market manipulation that let them inflate their own positions’ value.

JPMorgan first revealed the losses at the London office May 2012. The trades were made by Bruno Iksil, dubbed the London Whale because of the vastness of his holdings. The bank would go on to lose over $6.2 billion when the trades failed. Other traders also were purportedly involved. They used derivatives to bet on the health of huge corporations.