What is the controversy with JPMorgan Chase?

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Historical Financial Misconduct and Risk Management Failures

The “London Whale” Trading Loss (2012)

JPMorgan’s Chief Investment Office in London made massive derivative bets, particularly on credit default swaps, in what came to be known as the “London Whale” trades. These positions became so large they distorted the markets. When those trades soured, the bank suffered a loss of about US$6 billion. The incident raised serious questions about the bank’s internal risk controls, oversight, and how much senior management understood or monitored such large, complex trading positions. (Wikipedia)

Mortgage-Backed Securities and the Global Financial Crisis

In the aftermath of the 2007-2008 financial crisis, JPMorgan faced claims for its past dealings in mortgage-backed securities. The bank agreed to a then-record settlement of US$13 billion in 2013 with U.S. authorities over mis-selling or misrepresentation related to those securities. Critics argue that while JPMorgan itself acquired other distressed banks (e.g. Bear Stearns, Washington Mutual), it also inherited legal liabilities associated with those institutions and some of its own. Still, the magnitude of the settlement highlights how deeply financial institutions were implicated in the crisis. (Wikipedia)

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Market Manipulation and Trading Violations

Spoofing and Illegal Market Practices

One of the more egregious controversies: JPMorgan admitted to engaging in “spoofing” — placing orders with no intention of executing them in order to mislead other market participants and manipulate prices. Between 2008-2016, its traders used spoofing in markets for precious metals and U.S. Treasuries. The bank eventually paid about US$920 million in fines and settlements to various U.S. regulators (CFTC, SEC, Department of Justice) to resolve the case. (The Washington Post)

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Legal Accountability: Settlements and Fines

Regulatory Penalties Over Disclosures and Trade Reporting

• In 2024, JPMorgan was fined roughly US$348.2 million by U.S. regulators (Federal Reserve and OCC) for failing to adequately monitor trading activity globally across numerous trading venues, indicating weaknesses in trade surveillance and data controls. (Reuters)

• Around the same time, in a related area, they agreed to a US$151 million settlement with the SEC to resolve several enforcement actions including misleading disclosures to brokerage clients, conflicts of interest, and failure to properly disclose in-house investment incentives. (Reuters)

Whistleblower Law Violations

JPMorgan settled for US$18 million in a case where it was found to have included contracts with clients that violated whistleblower protection laws. Specifically, clients receiving settlements or credits over certain amounts were required to sign confidentiality agreements forbidding them from reporting possible securities law violations to the SEC. This was judged as undermining investor protections. (Investopedia)

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Customer and Consumer-Facing Issues

Checking Account Screening Reports

The Consumer Financial Protection Bureau (CFPB) took action against JPMorgan Chase for failing to properly manage the information supplied for “checking account screening reports.” These are reports that influence whether someone can open a bank account (e.g. through companies like ChexSystems). Between 2010-2014, Chase failed to establish accurate reporting procedures, did not notify customers of adverse reporting decisions, and kept consumers in the dark about dispute outcomes. The bank was penalized and required to correct its procedures. (Consumer Financial Protection Bureau)

Association with Jeffrey Epstein

JPMorgan has been criticized for its relationship with Jeffrey Epstein, who was accused of sex trafficking. It is claimed that the bank continued providing services (including large cash withdrawals, loans) to Epstein over many years despite warnings or red flags. A class-action lawsuit alleged that the bank had ignored internal warnings about Epstein’s abuse, and the bank agreed to a settlement of US$290 million to resolve at least one of these claims. In agreeing, JPMorgan did not admit wrongdoing. (Al Jazeera)

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Recent and Ongoing Issues

Alleged Prime Rate Fixing

A lawsuit filed in 2025 accuses JPMorgan among other major banks of conspiring since the early 1990s to fix the U.S. prime rate at exactly three percentage points above the federal funds rate. If true, this could mean that millions of borrowers paid inflated interest rates for decades. The case claims that because many consumer loans are indexed to the published prime rate, uniformity among banks could only occur via collusion. The banks involved have responded in various ways, some declining to comment. (Reuters)

Subprime Auto Lender Loss (“Tricolor”)

JPMorgan disclosed a US$170 million loss tied to the bankruptcy of a subprime auto lender called Tricolor. CEO Jamie Dimon called the situation “embarrassing” and warned that it might be a warning of broader credit risks, especially if the economy worsens. This has prompted concerns about underwriting standards and oversight in JPMorgan’s lending practices. (MarketWatch)

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Governance, Reputation, and Ethical Questions

Internal Controls, Transparency, and Accountability

Many controversies stem from questions about how well JPMorgan monitors its own operations: risk assessment, trade surveillance, ensuring clients are treated fairly, and acting on internal warnings. For instance, the bank has been criticized for inadequate internal controls allowing spoofing, failing to correct reporting procedures until forced by regulators, and for contracts that discourage whistleblowing. Regulatory resolutions often require JPMorgan to improve these systems. (Reuters)

Reputation vs. Legal Risk Trade-Off

JPMorgan often enters settlements without admitting wrongdoing. This is common among large institutions, but it leads to criticism that fines are simply part of doing business, rather than strong deterrents. Critics argue that because profits are so large, regulatory penalties are sometimes seen as “just a cost of doing business.” Also, delays in acknowledging problems or acting (e.g. client complaints, internal warnings) damage public trust. The bank says it self-identifies many issues and works proactively once they are known. (Reuters)

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Impacts and Broader Concerns

• Consumers and Borrowers: Practices like alleged rate-fixing or failure to disclose conflicts of interest can lead to consumers paying more in interest or fees than they should. Incomplete or misleading disclosures may affect consumer financial decisions.

• Regulation and Trust: Repeated regulatory interventions suggest gaps in oversight and enforcement, raising concerns about whether large banks can be held accountable effectively, or whether regulations keep pace with new risks (e.g. algorithmic trading, data surveillance).

• Systemic Risk: Because JPMorgan is among the largest banks globally, its failures or misconduct don’t just affect it, but ripple through financial markets. Issues like risk underestimation, weak controls, or abuses in derivatives or lending can contribute to instability.

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