U.S. prosecutors are still investigating JPMorgan Chase & Co.'s "London Whale" trading scandal for potential criminal wrongdoing, according to people familiar with the probe, in a sign that an expected $700-million settlement with U.S. and U.K. watchdog agencies may not put the issue to rest for the largest U.S. bank.
Federal prosecutors in New York and FBI agents are piecing together the events that led JPMorgan to restate its 2012 first-quarter earnings and eventually reveal more than $6 billion of losses from enormous bets a group of London-based traders made on illiquid credit derivatives, according to several sources.
The investigators are focusing on whether people inside the bank had more detailed knowledge about the potential losses than the bank had expressed in its early public statements about the matter, the sources said.
Two former bank employees -- Javier Martin-Artajo and Julien Grout -- have already been charged with trying to hide some of those losses by deliberately giving inaccurate values to the sophisticated securities involved in the trades.
Authorities are trying to determine whether Martin-Artajo and Grout and others working with them had felt pressured to minimize the losses, the sources said.
Bruno Iksil, the trader whose large bets earned him the nickname the "London Whale," has signed a cooperation agreement with prosecutors and has not been charged with any wrongdoing.
JPMorgan has said its previous statements have been truthful regarding the events related to the "London Whale" trades.
"Our senior executives said what they believed to be true at the time," Mark Kornblau, a bank spokesman, said yesterday.
In a memo to employees on Tuesday, chief executive Jamie Dimon said the bank is braced for more legal and regulatory scrutiny in the coming weeks and months.
He outlined a series of steps JPMorgan has taken to improve operations, including devoting "unprecedented" resources to fix its risk, legal and compliance operations.
Dimon said he has also begun meeting personally with regulators to improve relationships.