The Fraud Examiner

The JPMorgan Chase $2 Billion Blunder: Fraud or No Fraud?

June 2012

By Peter Goldmann


Was fraud somehow involved in the massive headline-making trading loss at JPMorgan Chase? Maybe. Maybe not. The Justice Department, the SEC, the CFTC and even the UK Financial Services Authority have all pounced on the $2 billion "mistake," issuing subpoenas for documents and monitoring trading activity in an effort clearly aimed at avoiding further public criticism of being asleep at the wheel. In addition, at least two class action lawsuits alleging fraud have already been filed.


Fraud or no fraud, the $2 billion-plus fiasco does tell us a lot about the attitudes of Wall Street's leaders four years after the calamitous financial meltdown that was to a large degree fueled by fraud — specifically, mortgage and securities fraud. By extension, the event tells fraud fighters across industries that much work still needs to be done to restore high standards of integrity and ethics – as the world's largest financial and government institutions continue to fail us in leading by example.


Fighting the Good Fight 

That work is now being intensified as pro-regulation forces redouble their efforts to influence government agencies to enforce the Dodd-Frank Act in the strictest possible way.


One high-profile leader of this movement is an organization called Better Markets, headed by attorney-turned-lobbyist, Dennis Kelleher. From a recent New York Times article: "In (Kelleher's) sound bites, the JPMorgan affair is a 'debacle.' Investment banks need to remember the 'hierarchy of guilt' for the crisis. (They are at the top.) A weak rule on swaps is an 'indefensible retreat' from tougher regulation and a 'poster child for the pernicious effect of (the financial) industry's army of lobbyists.'"


This comment rings eerily familiar to those made several years back by financial industry analysts and journalists about the epidemic of mortgage and securities fraud allegedly committed by Wall Street's biggest institutions in the years leading up to the housing market crash of 2008.


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