Once again, it appears that JPMorgan Chase & Co. has reached a carefully crafted settlement with the government that’s unlikely to haunt the bank in related private litigation.
The $100 million deal with the Commodity Futures Trading Commission resolves claims arising from the “London Whale” trading debacle. Like JPMorgan’s related settlement with the Securities and Exchange Commission and other regulatory agencies, the CFTC deal announced Wednesday includes a limited admission of wrongdoing. This time, while the bank admits that its traders “acted recklessly…by employing an aggressive trading strategy,” it doesn’t admit that it broke any laws.
As our affiliate the Blog of Legal Times explained here, the agency accused the bank of manipulating the market for credit derivatives by selling a massive number of credit-default swaps in a single day. Specifically it was accused of violating Section 6 of the Commodity Exchange Act and Rule 180.1 of the Dodd-Frank Act, a relatively new provision that prevents banks from recklessly using a “manipulative device” in the derivatives market. According to the CFTC’s press release, the bank “admits the specified factual findings” in the agency’s 14-page order instituting proceedings.
Kenneth Raisler of Sullivan & Cromwell led the team advising JPMorgan. Sullivan & Cromwell’s Daryl Libow is defending JPMorgan in a parallel securities class action in U.S. district court in Manhattan; a motion to dismiss is pending.
JPMorgan’s admission will be of little help to investors bringing private manipulation claims against the bank under the Commodity Exchange Act, said Wayne State University Law School Professor Peter Henning in an interview. Those investors have to show that they were directly affected by the bank’s manipulation, he said, but JPMorgan only admitted that its conduct was reckless or had a manipulative effect. “That’s what gives [the bank] some wiggle room,” he said. “They’ve largely succeeded in limiting their potential exposure.”