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Large Trader Exodus and High Employee Turnover At JPMorgan Chase

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EDITOR'S NOTE: Wall Street On Parade discusses the mass exodus of traders from JPMorgan Chase, which Bloomberg reported last week. At the same time, the news outlet also wrote an article downplaying the traders leaving and seemingly defending JPMorgan Chase CEO Jamie Dimon. While it seems like Bloomberg can’t figure out why these traders are leaving, WSOP provides a laundry list of recent scandals — from the bank’s “London Whale” scandal to 2019 RIOC charges — that puts the mass exodus in perspective. With this context, the “heavy-hitters” leaving the bank makes a lot more sense. 

Last Thursday, Hannah Levitt of Bloomberg News published a report about a large trader exodus at JPMorgan Chase. She wrote:

“…By this fall, many of the team’s heaviest hitters had gone.

“The setting wasn’t some struggling investment bank. It was the equity derivatives desk inside the mighty JPMorgan Chase & Co. – one of many pockets of employee turnover that have erupted there in recent months, keeping the company’s recruiters busy.”

That article was published at 8:00 a.m. By 11:00 a.m., Bloomberg News was finessing that negative article with another article by Brian Chappatta, which appeared to be an attempt to boost both the bank’s reputation as well as that of its Chairman and CEO, Jamie Dimon. Chappatta wrote:

“Even with competitive pay and the bank’s prestige, departure rates in many of its businesses are reportedly up at least a few percentage points from pre-pandemic levels. It stands to reason that much of corporate America is dealing with similar issues. After all, if CEO Jamie Dimon isn’t impervious to labor market forces, no one is.”

If JPMorgan Chase has any “prestige” left, it’s in no small part because Bloomberg News has failed to adequately report on the seven-year crime spree at the bank which has garnered it five criminal felony counts, to which it admitted, and a rap sheet that is likely the envy of the Gambino crime family. Dimon was at the helm of the bank throughout these serial crimes.

For how Bloomberg’s publishing properties have ridiculously lavished praise on Dimon as the rap sheet grew, see our reporting here. Michael Bloomberg, majority owner of the publishing and data terminal empire, even co-authored an opinion piece with Dimon for the opinion section of Bloomberg News in 2016. The same year, the New York Post reported that JPMorgan Chase was the second largest customer of Bloomberg’s data terminal business with 10,000 leases, which at the time cost around $21,000 each per year or approximately $210 million being forked over by JPMorgan Chase to Michael Bloomberg’s company.

During JPMorgan Chase’s London Whale scandal, where the bank gambled with bank depositors’ money in derivatives in London and lost at least $6.2 billion, Michael Bloomberg was Mayor of New York City. Instead of condemning this outrageous risk-taking with federally-insured deposits, Bloomberg was quoted in the Wall Street Journal calling Dimon “a very smart, honest, great executive,” adding “The controls failed. He’ll look at that and fix it.” That statement appeared in May of 2012. The five felony counts followed from 2014 to 2020.

Traders throughout JPMorgan Chase have had queasy stomachs since 2019. On September 16, 2019, for the first time that anyone on Wall Street can remember, RICO charges were brought against traders at JPMorgan Chase by the U.S. Department of Justice. Its precious metals trading desk was characterized at the time as a racketeering enterprise. The Justice Department couldn’t bring itself to state the name of the bank where the traders were located, calling JPMorgan Chase simply “Bank A.”

Last year, on September 29, the Justice Department brought the fourth and fifth felony counts against JPMorgan Chase. One count involved traders rigging the precious metals markets and the other count for rigging the U.S. Treasury market.  As the Justice Department had done in all the previous felony charges against the bank, it settled them with large fines, deferred prosecution agreements, and a probation period. (The bank has had three probation periods since 2014 for criminal activity.) But the Justice Department did one thing on September 29 that was unprecedented for a felony charge involving the rigging of the U.S. Treasury market. The Justice Department announced the charges without holding its usual press conference and taking questions from reporters.

The Justice Department’s deal was so sweet for a criminal recidivist that it wrote in its deal with the bank that “an independent compliance monitor was unnecessary” despite also revealing that the bank “did not voluntarily and timely disclose to the Fraud Section and the Office the conduct described in the Statement of Facts.”

Traders that are not burying their heads in the sand like Bloomberg News now understand that you may be sitting on a trading desk at a five-count felony bank one day and perp-walked the next day. In addition to felony counts for rigging trading in precious metals and U.S. Treasuries in 2020, the bank received one felony count in 2015 for rigging foreign exchange trading. In July 2013, a unit of JPMorgan Chase agreed to pay $410 million to the Federal Energy Regulatory Commission to settle claims of rigging California and Midwest electricity markets. In December of 2013, JPMorgan Chase agreed to pay 79.9 million Euros to settle claims brought by the European Commission relating to illegal rigging of benchmark interest rates.

There is also growing buzz among JPMorgan Chase traders that trying to do the right thing has no upside and a lot of downside in terms of one’s career.

In April of this year, Donald Turnbull, a former Global Head of Precious Metals Trading at JPMorgan Chase, filed a federal lawsuit against the bank. Turnbull worked on the same precious metals desk that was deemed to be a racketeering enterprise by the U.S. Department of Justice when it handed down indictments in 2019.

Turnbull’s lawsuit, filed in the federal district court for the Southern District of New York, alleges that the bank trumped up false charges against Turnbull as a pretext to terminate him when it was actually terminating him for cooperating with the Department of Justice’s investigation.

Turnbull was not one of the traders that was indicted by the Department of Justice. Nonetheless, Turnbull charges in the lawsuit that the indicted traders received better benefits when they were released from employment than he did. Despite a seriously-ill wife, Turnbull states in the lawsuit that JPMorgan Chase cancelled his health insurance, did not pay him severance, and took away his unvested stock awards.

The lawsuit offers multiple examples of how indicted traders were treated in a far more favorable manner than was Turnbull. One example, of many cited in the lawsuit, reads as follows:

“Trader C was employed by JPMorgan between 2008 and 2019. JPMorgan recognized that Trader C’s trading practices ‘could be perceived as spoofing’ when it began an internal investigation of his conduct in 2016. JPMorgan—having concluded that his conduct did not meet company standards—issued a verbal warning. But Trader C’s conduct so obviously violated JPMorgan’s ‘could be perceived as spoofing’ ‘standard’ that the Bank used examples of his order sequences in employee training materials as illustrations of how not to trade— because the conduct looked like spoofing. Nevertheless, JPMorgan retained him in its employ until he resigned three years later to plead guilty to eight years of spoofing, and a related CFTC enforcement action acknowledged that he placed ‘thousands’ of spoof orders.”

The lawsuit offers the court this analysis of why Turnbull had to be “neutralized”:

“Mr. Turnbull’s account lent credibility to the notion that the Bank itself was the most culpable entity in the alleged conspiracy; the risk he posed had to be neutralized…JPMorgan sought to reframe the narrative as though the defendants operated in their allegedly manipulative manner without JPMorgan’s knowledge.”

This is not the first time that a trader has alleged that higher ups were culpable in corrupt trading practices but threw the individual trader under the bus. In 2016, the Wall Street Journal published an article indicating that Bruno Iksil, the man dubbed the London Whale in the JPMorgan Chase derivatives trading scandal, had stated that the bank made him a “scapegoat.” Iksil stated to the paper that the trades were “initiated, approved, mandated and monitored” by senior management.

In addition to the risk that traders at JPMorgan Chase may end up facing RICO charges, a statute typically reserved for organized crime, there are also bad feelings among traders about how the bank has handled the COVID-19 crisis.

The bank ordered all senior traders back to their desks by September 21, 2020. That announcement came despite an outbreak of COVID-19 on a JPMorgan Chase trading floor in April of 2020, when a reported 16 people became infected.

Originally posted on Wall Street On Parade.

 

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