The trader at the centre of the criminal investigation surrounding JPMorgan's $5.8 billion trading loss has hired a lawyer in Paris, two sources familiar with the investigation said on Thursday.
Bruno Iksil, a French citizen and a former London-based trader in JPMorgan Chase & Co's Chief Investment office, is under scrutiny for trades he made in an illiquid market for credit products that resulted in the bank's losses. Iksil became known in the derivatives market as the "London Whale" for the size of the positions he took.
U.S. federal investigators are looking at whether Iksil, who was fired in July, and his superiors deliberately mismarked the value of some of the trading positions to try to cover up the losses. JPMorgan is also conducting an internal probe.
The sources, who did not want to be identified because they were not authorized to talk about the investigation, said Iksil has also hired criminal defence lawyers in New York and Washington, D.C.
The French lawyer named by the sources declined to comment. The U.S.-based attorneys did not immediately respond to requests for comment. A spokesman for JPMorgan declined to comment.
At least six people have retained lawyers in connection with the investigation. Iksil's supervisors, Javier Martin-Artajo and Achilles Macris, who were also fired by the bank in the wake of the losses, have attorneys in London and New York.
In addition to the CIO traders, the former head of the CIO office, Ina Drew, and two former risk officers, Peter Weiland and Irvin Goldman, have also hired lawyers.
This is not the first time in recent years that U.S. authorities have tried to tackle a trans-Atlantic investigation. A case in which traders on a London credit desk at the Swiss bank Credit Suisse were caught mismarking their positions to hide losses is serving as a rubric of sorts for the JPMorgan probe, sources familiar with U.S. prosecutors' thinking have said.
Credit Suisse discovered that traders managing a portfolio of mortgage-backed securities had been inflating their numbers to make their group's profits look bigger and to hide losses in 2007, as the subprime mortgage crisis deepened.
In February, federal prosecutors announced charges against three people from Credit Suisse, two of whom pleaded guilty to conspiring to falsify the bank's accounts.
The third, Kareem Serageldin, a U.S. citizen living in London, was indicted in federal court in New York but has yet to come to the United States to face the charges. In recorded conversations he leaned on more junior traders to overstate the value of their securities, the indictment alleged.
If the Federal Bureau of Investigation, which is reviewing emails, phone records and witness statements about the CIO losses, finds evidence of fraud and criminal charges are brought, prosecutors could face some of the same hurdles in the JPMorgan case as they did with Credit Suisse traders.
Iksil's French citizenship complicates potential efforts to bring him to the U.S. for a trial. Witnesses whose cooperation may be crucial to the case will also have to come to New York to testify in the event of a trial.
(Reporting by Emily Flitter and additional reporting by David Henry; Editing by Jennifer Ablan and Carol Bishopric)