Whistleblower Makes $30M - JPMorgan Makes $24 Billion
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Financial regulators have recently announced their largest-ever award for the informants who blew the whistle on a financial institution. The business in question has in the past betrayed the trust of its clients, misled its investors, and even found time to operate a ‘systematic bribery’ scheme – yet it recorded a legal profit of $24 billion in 2017.
It’s not a cryptocurrency, or a blockchain company. We’re talking about JPMorgan &Chase Co. Again.
According to Bloomberg, the Commodity and Futures Trading Commission has approved a reward of $30 million for unnamed individuals who revealed that JPMorgan was “steering asset-management clients into investments that would be especially profitable to the bank.”
A CFTC press release issued in 2015 explains the reasons for the fine in greater details. The agency found that the bank “typically asked” third-party hedge fund managers if they were willing to pay kickbacks for the placement of JPMorgan’s client funds. If they were not willing, the bank “sought an alternative manager with a similar investment strategy.”
The bank did not disclose the conflict of interests to its clients.
The affair resulted in a 2015 settlement in which the bank agreed to pay $100 million to the CFTC: a $40m fine and a $60m disgorgement. It is accompanied by a $267m settlement to the Securities and Exchange Commission.
It’s the biggest news to hit JPMorgan in, well, about a month. Although the bank has paid a total of $29 billion in fines and penalties since 2000, the company has proven that repeatedly working outside legal parameters – and getting caught – does not appear to dramatically harm their business.
- In 2016, JPMorgan paid $130 million after its Hong Kong subsidiary “engaged in a systematic bribery scheme by hiring children of government officials,” the SEC found. The scheme was so open that the bank “created ‘Referral Hires vs Revenue’ spreadsheets to track the money flow from clients whose referrals were rewarded with jobs.” Not one referral hire was refused.
- In 2013, the bank paid $13 billion (yes. billion) for its part in the 2008 mortgage meltdown, when it “bundled toxic loans into securities and misled investors who purchased those securities,” contributing to a two-year recession.
- Again in 2013, traders used their position to drive down the price of credit default swaps, to the benefit of the bank’s short positions. “These sales alone accounted for more than 90% of the day’s net volume traded by the entire market, were 15% of the month’s net volume traded by the entire market, and were nearly 11 times the [portfolio’s] average daily volume in February,” the CFTC reported. Over three days, from February 27th to 29th, the trading volume accounted for one-third of the trading in the entire month.
- In 2014, FinCEN fined the bank $461 million for failing to act on Bernie Madoff’s Ponzi scheme. “When JPMorgan suspected Mr. Madoff’s fraud, it focused on its own investment exposure and saved itself approximately $250 million,” FinCEN Director Jennifer Shasky Calvery said.
And so on. You can read the full list here.
It’s unfortunate that JPMorgan has provided such a comfortable home for Ponzi schemes, bribery, money laundering and market manipulation, but the CFTC ‘hopes’ that awards like these will curtail financial misdeeds.
“We hope that this award will continue to facilitate the upward momentum and success of the CFTC’s Whistleblower Program by attracting those with knowledge of wrongdoing to come forward,” said Christopher Ehrman, head of the agency’s Whistleblower Office.
Luckily Jamie Dimon has promised to tighten internal supervision, and hopefully those traders’ wrists won’t be too red after the slapping he gives them.
The author is invested in Bitcoin and other cryptocurrencies.