‘Voldemort’ hedge fund disaster could hit JP Morgan for £4bn in one of Square Mile’s worst trading catastrophes

http://www.dailymail.co.uk/news/article-2147717/Voldemort-hedge-fund-disaster-hit-JP-Morgan-4bn.html

By Ruth Sutherland

PUBLISHED: 13:48 EST, 21 May 2012 | UPDATED: 19:26 EST, 21 May 2012

British losses at the JP Morgan bank could double initial estimates and top £4billion – making it one of the worst trading catastrophes ever to hit the Square Mile.

The warning came as details emerged of bitter rows between the firm’s offices on Wall Street and in London, where the ill-fated deals took place.

The bank chief executive Jamie Dimon admitted earlier this month that the losses racked up by a team of traders in London amounted to around £1.25billion and could rise to £1.875billion.

But rival dealers now believe the black hole could swell to as much as £4.4billion as the bank struggles to unravel the highly complex deals amid turmoil in the eurozone.

Losses: JP Morgan boss Jamie Dimon has announced the curtailment of the bank's $15billion share buy back
Early retirement: Ina Drew, 54, has been forced out as head of JP Morgan's Chief Investment Office

Losses: JP Morgan boss Jamie Dimon, left, has announced the curtailment of the bank’s $15billion share buy back. The bank’s investment office was run by £10million-a-year Ina Drew, right, until her early retirement this month

The deals were made by French-born trader Bruno Iksil, nicknamed Voldemort after Harry Potter’s evil nemesis because he was such a ‘scary and powerful’ force in the City. Other epithets include ‘London Whale’ and ‘White Whale’.

The father of four, who is in his mid-40s, has lived and worked in London for seven years. He was reported to have received more than £60million a year in recent pay rounds.

Yesterday reports in the US revealed major rows in the bank’s chief investment office, led by high-flying female banker Ina Drew until her early retirement this month. Miss Drew was one of Wall Street’s most feted female bankers and was paid £10million last year.

She is said to have kept a lid on the tensions in her office thanks to her steely character and to have kept a weather eye on trading.

But she apparently began to lose her grip after contracting Lyme disease, a bacterial infection caused by ticks found in woodland.

Tensions are said to have simmered for some time between her two deputies, Achilles Macris in London and Althea Duersten on Wall Street.

After her departure, internal divisions and clashes of egos between Mr Macris and his New York counterparts came out into the open. A current trader at the firm told the New York Times: ‘The strife distracted everyone. I think everything spiralled because of personality issues.’

One former trader said that as the in-fighting continued, Mr Iksil and his boss Achilles Macris ‘could do what they wanted’. The black hole at JP Morgan, which owns the Queen’s stockbroker Cazenove, opened up as a result of convoluted trading at its London office.

Catastrophic trading blunder: Finance industry sources believe the mammoth loss racked up by JPMorgan's London office could as much as £4.4billionCatastrophic trading blunder: Finance industry sources believe the mammoth loss racked up by JPMorgan’s London office could as much as £4.4billion

The bank has not divulged details of the transactions but they are understood to be complicated ‘hedges,’ a kind of insurance policy designed to protect financial firms against big losses.

These hedges – believed to include bets on the government debt of struggling eurozone economies –  went badly wrong and the bank compounded its errors by piling on more ill-fated hedges in an effort to trade its way out.

In his Bloomberg trading profile, Mr Iksil boasts of being able to ‘walk on water’ while at the same time being ‘humble’.

According to friends and family, he rents a flat in Earl’s Court, West London, where he stays in the week and returns to Paris for a long weekend with his wife Karen and the children.

The Frenchman, who started working for JP Morgan in London in 2005, graduated from the Ecole Central in Paris with a degree in engineering. He had previously worked at French bank Natixis.

His sister, 41-year-old Sandrine Iksil, who lives in Leicester and works for a software company in Leamington Spa, told the Daily Mail earlier this month: ‘Bruno rarely talks about his work and you would not think he is a trader in the City. He is very quiet and is a family man.’

Despite this apparently unassuming exterior, the sheer size of Mr Iksil’s dealing has left seasoned City operators aghast.

The trades he pushed through are understood to be so large that he was moving multi-billion-pound markets single-handedly.

His losses caused a plunge in JP Morgan’s share price and have added weight to calls for tougher regulation of banks.

An array of hedge funds and rival banks including Goldman Sachs are thought to have made profits from JP Morgan’s folly. ‘Assuming some of these trades are in the eurozone countries that are under duress, then the losses could easily have doubled,’ one senior City trader told the Daily Mail.

‘This was a calculated gamble that went horribly wrong.’

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Posted on May 21, 2012, in Economy / Finance and tagged , , , , . Bookmark the permalink. 1 Comment.

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