[ by Howard Haykin ]

Federal investigators trying to determine whether traders in JPMorgan Chase's London Office tried to cover up some of the nearly $6 billion in losses taken on a series of complex derivatives, have shifted their attention to another trader.  Julien Grout, a JPMorgan Chase trader since 2009, worked in the bank's Chief Investment Office and reported to Bruno 'The London Whale' Iksil, the French credit trader who is a central figure in the federal probe - that, according to 2 sources.

Grout, who's still working for JPMorgan, reportedly has retained a lawyer in connection with the investigation.  Like Iksil, Mr. Grout is French, and he is at least the 7th current or former JPMorgan employee to retain outside counsel in connection with the probe. 

Grout worked for Iksil during the time the bank's Chief Investment Office was taking on increasingly large positions in an illiquid credit market, including an index that tracks derivatives tied to corporate defaults.  For a good while, the trades were profitable for the bank. But early this year, Iksil and the other traders then found themselves squeezed by hedge funds on the opposite sides of the trades when the market turned on JPMorgan.  After JPMorgan's positions became public, the bank unwound the trades that resulted in a loss of at least $5.8 billion.

Internal Investigation. An ongoing internal investigation supposedly has revealed that individuals inside the bank may have deliberately tried to cover up the size of the losses by mismarking the values of the trading positions.  That said, federal investigators, including prosecutors in New York and the SEC, want to determine whether anyone involved committed a crime. Both internal and external investigators are reviewing emails and other records and interviewing current and former employees to try to piece together the events surrounding the losses.

Iksil was fired by the bank in July along with two superiors, Javier Martin-Artajo and Achilles Macris, on the basis of supposed evidence gleaned during from the internal investigation, that the traders attempted to hide some of the losses.  The highest ranking JPMorgan executive to draw scrutiny is Ina Drew, who headed the Chief Investment Office prior to resigning in May.

Persons representing the bank and persons under investigation declined to comment on the proceedings to date. 

For further details, go to: [Reuters, 9/5/12].