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JPMorgan Whale Pushed for ‘Young’ Trader Who Later Took His Job

March 18, 2013

JPMorgan Whale Pushed for ‘Young’ Trader Who Later Took His Job

Michael Cavanagh, co-chief executive officer of corporate and investment bank with JPMorgan Chase & Co., left, and Douglas Braunstein, vice chairman of JPMorgan Chase & Co., swear into a Senate Permanent Subcommittee on Investigations hearing in Washington on March 15, 2013. Photographer: Andrew Harrer/Bloomberg

Bruno Iksil, the trader whose wagers cost JPMorgan Chase & Co. (JPM:US) $6.2 billion and led to his ouster, may have unwittingly helped pick his replacement.

Henry Kim, then trading high-yield indexes for the market- making desk at the firm’s investment bank, is “very young and very talented” and should be considered for a post in the chief investment office, Iksil said in a Jan. 30, 2012, e-mail to supervisor Javier Martin-Artajo, according to documents accompanying a report last week by the U.S. Senate Permanent Subcommittee on Investigations.

Kim “would like to know whether there is some opportunity for him here at CIO be it New York or London,” Iksil wrote. “I thought maybe he could try to meet with you while you are in New York even informally.”

Iksil wrote the message months before his souring bets spiraled into a public spectacle that Chief Executive Officer Jamie Dimon, 57, attributed to “egregious,” self-inflicted mistakes. The e-mail, included among 598 pages of documents accompanying the Senate report, shows Iksil’s interest in taking talent from the company’s investment bank -- a division that CIO employees came to suspect of undermining the trades.

As the losses mounted, CIO traders started deviating from their traditional practice of pricing their positions “at or near” market midpoints, the Senate report shows. The CIO “began to suspect and then blame” the market-making desk for assigning prices that hurt the CIO’s trades and leaking information to the market, according to the report.

Joseph Evangelisti, a spokesman for New York-based JPMorgan, declined to comment. Kim and Ray Silverstein, a lawyer for Iksil, didn’t respond to e-mailed requests for comment.

Stop Trading

Ina Drew, then head of the CIO, ordered Iksil to stop trading on March 23 as the losses eclipsed $500 million, according to the Senate report. By June, while Iksil was still employed, Kim was sent in to trade the synthetic credit portfolio in the CIO, a person familiar with the move said at the time.

The Market Now Blog: 'It's Becoming Idiotic,' the Senate's Riveting Story of the London Whale

Kim reported to Rob O’Rahilly, who replaced Achilles Macris as head of the CIO for Europe, Middle East and Africa, the person said. On July 12, the bank sent Iksil his termination letter, the Senate report shows.

Kim is joining New York-based Reef Road Capital Management LLC, a credit hedge fund said to be starting in the second quarter, people with knowledge of the firm said last month. The fund will trade assets including loans, high-yield bonds, credit derivatives, distressed securities and trade claims, with a focus on the U.S. and Europe.

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Alan Goldstein at agoldstein5@bloomberg.net


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $59.0 USD
    • 0.33
    • 0.56%
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