JP Morgan Chase

JPMorgan Sued by Indiana Church

Published on: February 6, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Christ Church Cathedral of Indianapolis is suing JPMorgan (JPM) for securities fraud. The church contends that the financial firm purposely mismanaged its money over the last ten years, causing $13 million in losses. Eli Lilly, the founder of pharmaceutical giant of the same name, gifted a large trust fund to the Episcopal congregation. Mr. Lilly appointed three local banks as trustees but JPMorgan became involved after it acquired two of the banks in 2004.

Court filings claim that once JPMorgan came on board the church’s portfolio of stocks and bonds were replaced by the firm’s own funds, including alternative investments, which involve higher fees paid to the firm. Over eight years the firm’s management fees went up from $35K to $177K, while it reaped in additional fees for selling proprietary products. By the close of 2009, the church was invested in over 50 investment funds— 75% of those were in the firm’s own products.

In 2004, when the firm took over the church’s trust fund, the congregation had $34.6 million. By the end of 2013 it had $31.6 million. Because of this, the congregation has been unable to do all of its charitable works. The church believes that its investment strategy should have let it take money from its endowment to fund its aid work without losing any money. The Christ Church Cathedral of Indianapolis wants JPMorgan to pay back the $13 million losses, which includes lost profits.

JPMorgan Suspends Forex Trader for Alleged Disclosures Involving Royal Bank of Scotland-Related Activities

Published on: January 14, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Bloomberg is reporting that according to a source, JPMorgan Chase & Co. (JPM) has suspended currency dealer Gordon Andrew for alleged wrongdoing involving his work at Royal Bank of Scotland Group Plc. (RBS). According to The Wall Street Journal, people familiar with the matter say that the firm discovered evidence that Andrew disclosed trading data to employees of other banks. The forex trader does a lot of work converting huge amounts of euros into pounds at benchmark rates related to subsidies that the EU pays to British farmers every year.

Andrew began working for JPMorgan in October 2012 after Richard Usher, an RBS colleague, also switched to the firm. Usher was JPMorgan’s chief currency dealer in London until 2013 when he was put on leave during a global probe into foreign exchange market manipulation. He left the firm the following year. Regulators in the U.K. and the U.S. have since fined JPMorgan $1 billion related to the rigging probe. RBS was ordered to pay a $634 million fine.

Today, the WSJ reported that the probes into currency market manipulation have led to new signs of possible wrongdoing. Sources tell the newspaper that JPMorgan has even put aside another $900 million to cover investigation-related costs as well as legal bills. Meantime, broker-dealer Tullett Prebon PLC (TLPR) has started an internal review into its currency market practices. One of its brokers was allegedly referred to as a trade conduit in one chat room. That broker still works for the firm. In 2014, British fraud prosecutors charged an ex-Tullet broker with assisting other bank traders in manipulating trades.

JPMorgan to Pay $500M to Resolve Mortgage Settlement Involving Bear Stearns, Says Source

Published on: January 10, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Reuters and Bloomberg are reporting that according to person familiar with the case, JPMorgan Chase (JPM) has consented in principal to resolve a class action case related to Bear Stearns’ sale of $17.58B of faulty mortgage securities for $500 million. JPMorgan purchased Bear Stearns in 2008.

The agreement settles claims that Bear Stearns violated federal securities laws when, from May 2006 to April 2007. it sold certificates backed by over 47,000 primarily subprime and low documentation “Alt-A” mortgages in over a dozen offerings. Almost all certificates were eventually reduced to “junk” status even though 92% of them had been given “trip-A” ratings previously.

The plaintiffs, led by the New Jersey Carpenters Health Fund and, the Public Employees’ Retirement System of Mississippi, claim that offering documents included misleading and false statements about underwriting guidelines that Bear’s EMC Mortgage unit and other lenders used, as well as inaccuracies related to associated property appraisals. According to the lawsuit, because of the omissions and false statements, the class bought certificates that were a lot risker than what they were represented as and unequal in quality to other investments that received the same credit rating.

$13B JPMorgan Chase Mortgage Settlement Was Not Sufficient, Says Whistleblower

Published on: November 15, 2014 | by Shepherd Smith Edwards & Kantas, LLP

According to Alayne Fleischmann, the whistleblower who gave the evidence which helped resident in a $13 billion mortgage settlement from JPMorgan Chase(JPM) to the U.S. Department of Justice last year, that amount was not enough. Fleischmann, a lawyer, joined the financial firm as a deal manager in 2006.

She says that not long after she started working there she noticed that about half of the loans in a multimillion-loan pool included overstated incomes. Such loans, she said, were likely at risk for default—a precarious position for both the investors and the securities. Fleischmann said that she notified management about how the bank was re-selling subprime mortgages to customers without letting them know about the risks. She also spoke about how one bank manager wanted to put in place a non-email policy so there would be no paper trail to show that the firm was aware that such activities were happening.

It was the sale of toxic sub-prime loans by JPMorgan and other US banks that incited the US housing market crisis, which eventually spurred the global financial meltdown of 2008. Repackaged loans were sold to pension funds and other institutional investors, with many buyers unaware of the high default risks involved.

Citibank, JPMorgan Among Firms to Pay $4.3B For Currency Rigging Penalties

Published on: November 12, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Royal Bank of Scotland Group Plc (RBS), UBS AG (UBS), (HSBC), Bank of America Corp (BAC), HSBC Holdings Plc, JPMorgan Chase & Co. (JPM), and Citigroup Inc. (C) will pay $4.3 billion in penalties to regulators in the United States and Europe for failing to stop traders from attempting to manipulate the foreign exchange market. Further penalties could also result not just for the banks but also for certain individuals in the wake of litigation accusing bank dealers of colluding amongst themselves to rig benchmarks that are used in determining foreign currency.

According to authorities, the dealers exchange confidential data regarding client orders and worked it out so their trades would enhance profits. This information was purportedly exchanged in online chat rooms. Regulators say the misconduct occurred from 2008 through October 2013. The probe has also widened to look into whether traders used confidential information to take bets on unauthorized personal accounts and if clients were charged excessive commissions by sales desks.

The currency rigging probe has led to the firing or suspension of over 30 traders while the number of automated trade transactions have increased. In the U.S. the Federal Reserve, the Justice Department, and New York’s financial regulator continue to investigate banks over foreign exchange trading. Meantime, some lawyers have spoke out about how the settlement doesn’t address client compensation.

DOJ Launches Criminal Probe Into JPMorgan, Citigroup Foreign Exchange Business

Published on: November 4, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Department of Justice has begun a criminal probe into the foreign exchange businesses of JPMorgan Chase (JPM) and Citigroup (C). The investigations come in the wake of allegations that banks in the United States and abroad manipulated key reference rates in the foreign exchange currency markets.

On Monday, JPMorgan disclosed the criminal investigation in a regulatory filing. Noting that other regulators, including the U.S. Commodity Futures Trading Commission and UK’s Financial Conduct Authority are conducting civil probes, the firm estimated that current legal proceedings could reach $5.9 billion.

Last week, Citigroup announced that it too was facing a criminal probe over foreign currency trades and controls. The bank is also dealing with inquiries from regulators. Citigroup said it has put aside $600 million in legal provisions over what had been budgeted for the third quarter.

European Commission Takes Action Against JPMorgan, UBS, RBS & Credit Swiss for Cartel Conduct

Published on: October 27, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The European Commission has found that Royal Bank of Scotland (RBS), JPMorgan (JPM), UBS AG (UBS) and Credit Suisse (CS) engaged in cartel behavior. Except for RBS, which received immunity from having to pay any fines by disclosing the cartel conduct, the other banks were fined $120 million for their activities. For cooperating, UBS and JPMorgan received fine reductions. Along with Credit Suisse, both banks got a 10% reduction for consenting to settle.

All four financial institutions are accused of running a cartel involving bid-ask spreads of Swiss franc interest-rate derivatives in the European Economic Area. Banks and companies typically use interest rate derivatives to manage interest rate fluctuation risks. A “bid-ask spread” is the difference between how much a market maker is willing to sell and purchase a product.

According to the European Commission, between May and September ’07, the four banks agreed to quote to third parties wider fixed bid-ask spreads on certain short-term, over-the-counter Swiss franc interest rate derivatives while keeping narrower spreads for trades between them. The purpose was to reduce their transaction costs and keep liquidity among themselves, as well as keep other market makers from competing on equal terms in the Swiss franc derivatives market. In one action, JPMorgan Chase (JPM) was fined €61.7 million euros for purportedly manipulating the Swiss franc Libor benchmark interest rate in an illegal cartel with RBS, which, again, had immunity from fees.

Pension Fund Securities Lawsuits: JPMorgan to Face MBS Case, PERSM Files Class Action Case, & Institutional Clients Can Sue BP

Published on: October 17, 2014 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Ordered to Face $10B Mortgage-Backed Securities Case

A federal judge said that JPMorgan Chase & Co. (JPM) must face a class action securities fraud lawsuit filed by investors accusing the bank of misleading them about the risks involved in $10B of mortgage-backed securities that they purchased from the firm prior to the financial crisis.

U.S. District Judge Paul Oetken certified a class action as to the bank’s liability but not for damages. He said it wasn’t clear how investors were able to value the certificates they purchased considering that the market hadn’t been especially liquid. He did, however, say that the plaintiffs could attempt again to seek class certification on class damages.

Credit Suisse, Goldman Sachs, JPMorgan, and 16 Other Banks Agree to Swaps Contract Modifications to Assist Failed Firms

Published on: October 11, 2014 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase & Co. (JPM), HSBC Holdings Plc (HSBA), Goldman Sachs Group Inc. (GS), Credit Suisse (CS), and fourteen other big banks have agreed to changes that will be made to swaps contracts. The modifications are designed to assist in the unwinding of firms that have failed.

Under the plan, which was announced by the International Swaps and Derivatives Association, banks’ counterparties that are in resolution proceedings will postpone contract termination rights and collateral demands. According to ISDA CEO Scott O’Malia, the industry initiative seeks to deal with the too-big-to-fail issue while lowing systemic risks.

Regulators have pressed for a pause in swaps collateral collection. They believe this could allow banks the time they need to recapitalize and prevent the panic that ensued after Lehman Brothers Holdings Inc. failed in 2008. Regulators can then move the assets of a failing firm, as well as its other obligations, into a “bridge” company so that derivatives contracts won’t need to be unwound and asset sales won’t have to be conducted when the company is in trouble. Delaying when firms can terminate swaps after a company gets into trouble prevents assets from disappearing and payments from being sent out in disorderly, too swift fashion as a bank is dismantled.

Securities Lawsuit Accuses Deutsche Bank, JPMorgan Chase, Credit Suisse, and Other Banks of Manipulating ISDAfix

Published on: September 4, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Alaska Electrical Pension Fund is suing several banks for allegedly conspiring to manipulate ISDAfix, which is the benchmark for establishing the rates for interest rate derivatives and other financial instruments in the $710 trillion derivatives market. The pension fund contends that the banks worked together to set the benchmark at artificial levels so that they could manipulate investor payments in the derivative. The Alaska fund says that this impacted financial instruments valued at trillions of dollars.

The defendants are:

• Bank of America Corp. (BAC)