JPMorgan Hit With Lawsuits Over Trading Losses
JPMorgan Chase now faces two new lawsuits from shareholders angry over the bank's $2 billion trading loss. The suits, filed in federal court in New York, allege JPMorgan misled investors about the bets that went bad.
"Defendants misrepresented the losses and risk of loss to the Company arising from massive bets on derivative contracts," plaintiff Saratoga Advantage Trust said in court papers. "These derivative bets went horribly wrong."
Chief executive Jamie Dimon, whose pay package was approved by shareholders on Tuesday, has said the bank made "egregious" and "self-inflicted" mistakes, words that may come back to haunt him in court.
"We believe that he made false and misleading statements and omissions quite frankly," Bruce Ventimiglia, CEO of Saratoga Advantage Trust, one of the firms that filed suit, told ABC News.
The lawsuit names Dimon and Chief Financial Officer Douglas Braunstein.
Dimon and Braunstein "knew, or could not reasonably have been unaware of, the magnitude of losses being incurred by JPMorgan," court records said.
When JPMorgan disclosed the loss last week the bank said it resulted from a failed hedging strategy meant to insulate its portfolio from losses. Ventimiglia does not buy the explanation.
"They have mislabeled what they were doing. They describe what they were doing as hedging strategies. We think they were outright bets," he said.
JPMorgan Chase declined to comment on the lawsuits. The bank has also declined to give specifics about the trades, but Saratoga Advantage Trust believes "these wagers may have reached close to $100 billion in size."
"These types of derivatives trades are at the center of the 2008 financial crisis," Ventimiglia said. "The proper disclosure of what these banks are doing is critical to investors."
The Federal Bureau of Investigation has opened a criminal probe into the JPMorgan trades.