At one point, after Iksil reported a higher loss than Martin-Artajo wanted, Martin-Artajo told Iksil in a phone call, "This only creates — it just creates more tension, you understand? It's not going to help me as much, right?" Finally, Martin-Artajo told Iksil, "I think that you're an honest guy, you know. It's just that, I did not want you to do it this way."
In April 2012, media reports publicized the large bets wagered by the portfolio, the SEC noted. The first trading day after the reports surfaced, the portfolio fell in value by hundreds of millions of dollars, it said. Still, Martin-Artajo directed Grout to disclose to management only $5.7 million in daily losses, a figure Grout put out but replaced later in the day with a loss of $395 million, the SEC said.
A JPMorgan spokesman declined to comment.
The "London Whale" accusations have been a heavy burden for JPMorgan, tarnishing its reputation as a stellar risk manager and the favorite of Washington lawmakers. It has been an embarrassment for a bank that's used to coming out ahead of its peers, forcing it to restate earnings and face bruising hearings in front of Congress.
Wednesday's charges are hardly the end: The Federal Reserve, U.S. banking regulators and the U.K. Financial Conduct Authority, among others, are also looking into the trading loss.
JPMorgan, the biggest U.S. bank by assets, has so far weathered the storm. Last year, even with the trading loss, the bank pulled in its biggest annual profit ever and its stock is up by a third from its pre-"London Whale" price.
The bank has also gotten rid of top executives and taken back bonuses of some who were responsible. It has acknowledged mistakes but has been adamant that it did not try to mislead investors.
Prosecutors also announced Wednesday that they had agreed not to prosecute Iksil, the trader who allegedly made the bad bets. The deal requires him to cooperate fully with law enforcement.
Bharara, explaining Iksil's "rare" non-prosecution deal, said of the ex-trader: "I don't think you would call him blameless."
But, Bharara added, he "did sound the alarm more than once."
Associated Press writers Marcy Gordon in Washington and Danica Kirka in London contributed to this report.
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