Shareholders just had a major victory in the “London Whale” litigation, which caused a $6.2 billion loss, against JPMorgan Chase & Co – permission to pursue their securities fraud lawsuit against the bank as a class action. Arguing against class certification, JPMorgan Chief Executive Officer Jamie Dimon and former Chief Financial Officer Douglas Braunstein said shareholders would be unable to show they relied on alleged misstatements about the bank’s risk management, or prove damages on a class-wide basis.
U.S. District Judge George Daniels in Manhattan rejected the largest U.S. bank’s arguments against class action certification. The lawsuit arose out of the oversight by JPMorgan’s Chief Investment Office of a synthetic credit portfolio that caused the $6.2 billion loss and was linked to traders in the bank’s London office including Bruno Iksil, the so-called “London Whale.”
Shareholders, led by pension funds in Arkansas, Ohio and Oregon alleged that JPMorgan, Dimon and Braunstein knowingly hid increased risks at JP Morgan’s Chief Investment Office. In an April 13, 2012 conference call, Dimon called reports about the synthetic portfolio a “tempest in a teapot.” The class period runs from April 13 to May 21, 2012, a period when JPMorgan’s share price fell by roughly one-quarter, wiping out more than $40 billion of market value. JPMorgan agreed in November to pay roughly $1.01 billion to resolve almost identical probes by U.S. and European regulators. Five other banks, Bank of America, Citigroup, HSBC, RBS, and UBS, also settled with regulators in November for an additional $3.3 billion.
Former traders Javier Martin-Artajo and Julien Grout have been criminally charged in the United States with hiding losses linked to Iksil, who has been cooperating with prosecutors. Three related investor lawsuits against JPMorgan executives and directors over the trading loss have been dismissed. The case is in the U.S. District Court, Southern District of New York.
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