Following JPMorgan Chase bank's issuance of its 2nd Quarter financial report July 12, reports surfaced of the beginning of a criminal investigation of the bank.
Morgan reported that it now acknowledges losses from its huge London-office derivatives trades of $4.9 billion and rising. The bank reported a $4.4 billion loss in the second quarter, still leaving it with a quarterly profit of about $5 billion due to various one-time tricks which will lower its profitability in the future. It will report another $460 million loss in a restatement of its first-quarter report, and said that that Q1 loss is likely to rise. And it "expects" another $1-1.7 billion loss to come, so the total loss has now reached the $6-7 billion range recently leaked.
More importantly, though, Morgan admitted that traders in the London CIO office had not just suffered big losses; they had also "concealed" them, and still other losses, by deliberately misreporting the value of their credit default swap derivatives. Sound LIBOR-like? The bank admitted that its first-quarter report was fraudulent: "The Firm has consequently concluded that the Firm's previously-filed interim financial statements for the first quarter of 2012 should no longer be relied upon."
By late afternoon on July 12 Reuters was reporting, from anonymous sources, that JPM Chase was under Federal criminal investigation. "'I see little doubt that someone is going to get charged with fraud,' said Bill Singer, a lawyer at Herskovits in New York who provides legal counsel to securities industry firms, and publishes the BrokeandBroker website."