A clock stands in front of the offices of JPMorgan Chase & Co. in the business and financial district of Canary Wharf in London, U.K., on Tuesday, April 10, 2012. Bruno Iksil, a London-based trader in JPMorgan Chase & Co.'s chief investment office, has built derivatives positions linked to corporate credit that are so big he's moved markets, according to hedge fund managers and dealers. Photographer: Simon Dawson/Bloomberg

It was, the British judge said, an odd request. While most traders would be relieved that the UK Financial Conduct Authority had stopped investigating them, here was a trader demanding that it continue.

The trader was Julien Grout, formerly of JPMorgan Chase, who had been caught up in the 2012 fiasco that centred on a character known, because of the size of his market bets, as the “London whale”.

Mr Justice Males, the judge, last week denied Mr Grout’s application for judicial review of the FCA’s decision to stop pursuing him. The FCA said it saw no point because, among other things, he already faced criminal charges in the US.

Mr Grout’s demand that the FCA carry on investigating him is only one of many odd features of the London whale case. To extend the piscine metaphor, the whole thing smells.

The case dates back to JPMorgan’s decision in 2006 to begin trading in synthetic credit derivatives. By the beginning of 2012, the bank’s London traders were sitting on huge losses.

Up until then, the traders had been valuing the derivatives at the midpoint of the daily range of prices. As losses spiralled out of control, a US Senate report later said, they began using prices away from the midpoint that hid the scale of the potential damage.

The report named three London-based traders as being involved: Bruno Iksil (the “London whale”), Javier Martin-Artajo, his superior, and Mr Grout, described by Mr Justice Males as “Mr Iksil’s assistant”.

Mr Grout’s lawyers say that he acted “in accordance with the bank’s prior practices and the instructions given to him by his superiors”.

When it began questioning Mr Grout in 2013, the FCA, in the words of his lawyers, “compelled [him] to attend upon them and answer questions”.

Had he been questioned by the US authorities, he would have been able to refuse to answer on the grounds that he might incriminate himself.

The FCA gave transcripts of his interviews to the US authorities. In 2013, a US grand jury indicted Mr Grout and Mr Martin-Artajo for conspiracy, falsifying books and records and causing false statements to be made in JPMorgan’s Securities and Exchange Commission filings.

Mr Iksil, the whale, has not been indicted. He has been given immunity from US prosecution in return for giving evidence against Mr Martin-Artajo and Mr Grout.

Mr Grout’s lawyers said the reason he wanted the FCA to continue its investigation was that he wanted the chance to clear his name.

But, Mr Justice Males said, he would have the opportunity to do that in the US. “I would expect a United States jury to be alert to the implications of Mr Iksil’s status as a ‘protected witness’ enjoying immunity from prosecution and alive to any unfairness which may result from any sense that the minnow is facing the full weight of the criminal law while the whale has escaped justice,” he said.

But that is to assume that a US criminal trial is a fair contest in which the prosecution has to persuade the jury of the accused’s guilt beyond reasonable doubt.

That view is a mirage. This is not my description. It is that of Jed Rakoff, a US judge, who wrote an essay in the New York Review of Books entitled “Why Innocent People Plead Guilty”.

Faced with the prospect of a long prison sentence if they were convicted, 97 per cent of those facing US federal trials agreed to a plea bargain, confessed their guilt and accepted a shorter sentence “effectively dictated by the prosecutor”, Judge Rakoff wrote.

What of JPMorgan? It has been found highly culpable on both sides of the Atlantic. The FCA fined the bank £137.6m. In the US, the authorities have imposed penalties on JPMorgan over the whale affair totalling $700m.

The US Senate report said JPMorgan’s response had been “incomplete, contained numerous inaccuracies, and misinformed investors, regulators and the public”. No top JPMorgan executive has been charged over the affair or the statements to regulators and investors.

Mr Martin-Artajo is in Spain, where he is resisting extradition. If Mr Grout were in the UK, he would be doing the same. Judging by the fate of others the US has demanded, he would eventually be put on a plane to America in handcuffs.

But Mr Grout is French and he has gone home. His country does not extradite its citizens to the US. All I can say, in this case at least, is vive la France.


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