JPMorgan Pays for Shorting Madoff Without Telling Anyone

Post by [deleted] » Wed, Jan 08, 2014, 10:34 PM UTC

bonemachine wrote: post #37

trader wrote: post #34

Earlier quoted context omitted.

If they really though there was fraud, why wouldnt they have taken a huge short position and reported to the SEC, accelerating the winddown process. This is what saba did with the JPM whale trades, they took a huge CDS position and reported the "whale", making 100mm+. They didnt do this because a) they didnt know about the fraud, or b) didnt want to hurt their clients. Everyone likes to point the finger at someone el…

If they really though there was fraud, The issue at hand (and for which JPMorgan was fined) wasn't whether they definitively knew, or "thought" there was a fraud or not. It was for specific violations of the Bank Secrecy Act: failing to report suspicious activity, and failing to create specific controls against money laundering. All of the recent press articles are really quite clear about this. You may not agree wit…

Post by mcintyre1994 » Wed, Jan 08, 2014, 10:51 PM UTC

twoodfin wrote: post #15

joosters wrote: post #12

Earlier quoted context omitted.

I have no problem with JPM shorting or otherwise taking advantage of this fraud How is that not profiting from crime?

If you believe, say, that Apple has been faking its revenue and profit numbers for the last 10 years, you can go ahead and short them on the expectation that they'll get caught, Tim Cook will go to jail and the stock will tank. In the meantime, the presence of your short will in some small way drive down the price of AAPL, or at least signal to the rest of the market that somebody believes things are not as rosy for…

Post by rayiner » Wed, Jan 08, 2014, 10:54 PM UTC

minimax wrote: post #39

rayiner wrote: post #8

Nice summary of the situation. This is the takeaway for me: "If you think of JPMorgan's businesses as operating more or less independently, but occasionally making each other money by cross-selling, then this mess makes more sense. A London investment bank that considered and rejected a derivative-linked investment in Madoff would have no obligations to report its suspicions to U.S. regulators. A boring custody bank…

Also, quite refreshing to read an article by someone who apparently has some experience with Wall Street. According to his bio he worked in investment banking at Goldman and was an M&A lawyer before that. When I first found his column I went through and read a bunch of them. They're all all pretty good. If you like that sort of financial journalism from the perspective of former practitioners, another good one is Mat…

Post by bonemachine » Wed, Jan 08, 2014, 11:03 PM UTC

spinlock wrote: post #38

trader wrote: post #23

This is a very misleading article in my opinion. Investment banks provide investors access to risks which they want, in this case investors WANTED access to Madoff structured notes because Madoff had been outperforming, therefore JPM had a find a way to hedge themselves to reduce their risk. After investing a tremendous amount in madoff, JPM probably realized that they could hedge easier by going long the general mar…

> When assessing risks of this size, I am glad that JPM seemed to be asking all the right questions about Madoff (which no one else, not even the SEC, was asking), it is funny JPM is being penalized for this. It's amazing what JPM is being held liable for. I think it sets a terrible precedent that they were basically fined $13B for acquiring WaMu and Bear Sterns in the financial crisis. I can't imagine another bank c…

Post by bonemachine » Wed, Jan 08, 2014, 11:11 PM UTC

refurb wrote: post #3

colinbartlett wrote: post #2

JPMorgan "Pays" but barely. $1.7 billion is nothing out of $100 billion in annual revenue and $2.5 trillion in assets.

Did you read the article? The basically got fined for not doing the SEC's job.