JPMorgan Chase has agreed to pay $100 million and admit its traders engaged in reckless behavior to settle Commodity Futures Trading Commission charges that it manipulated markets as part of its so-called London Whale trades on a specific day last year.
The fine and admission of questionable conduct are milestones for the CFTC, which used new authorities granted under the Dodd-Frank Act to curb manipulative conduct. Among other things, the law allows the commission to crack down on those who "intentionally or recklessly" use "any manipulative device" or scheme to defraud other investors.
In the case of JPMorgan, the CFTC argued that the bank sold massive amounts of insurance against corporate defaults on Feb. 29, 2012 that pushed down the price of a related corporate-credit index that day. (Those trades, part of a broader set of corporate-credit derivatives positions that eventually cost the bank more than $6 billion, were ultimately a failed attempt to reverse growing losses.)