U.S. investigates whether JPMorgan traders hid losses

federal criminal investigators are looking at people at JPMorgan in London, where the CIO's risky bets were placed. The criminal investigation began in earnest in the past few weeks after JPMorgan's internal investigation uncovered that CIO traders may have intentionally masked losses, said the source, who is not authorized to speak about the matter and declined to be identified. "I see little doubt that someone is going to get charged with fraud," said Bill Singer, a lawyer at Herskovits in New York who provides legal counsel to securities industry firms, and publishes the BrokeandBroker website. Authorities ranging from the FBI to the U.S. Securities and Exchange Commission are probing the bank. The SEC could charge JPMorgan with weaknesses in oversight and internal controls, said James Cox, a securities law expert at Duke University. "I think the SEC will continue to look at 'What exactly did Jamie Dimon know and when did he know it?'" Cox said. An internal review found that some of the CIO traders appear to have deliberately ignored the massive size of their trades - and the difficulty in liquidating them - when valuing their positions. The values they reported ended up being too high, which is forcing JPMorgan to restate its first-quarter results. The bank is cooperating with authorities. The trading losses and possible deception from traders are a black eye for Dimon, who was respected for keeping his bank consistently profitable during the financial crisis. Dimon, who has criticized regulators for meddling too much with banks, has lost credibility because of difficulties in his own house. "How do we know there are not more roaches in the kitchen?" said Paul Miller, an analyst at FBR Capital Markets, referring to the maxim that seeing a single roach typically means there are far more hiding in the woodwork. The Chief Investment Office became infamous in May when JPMorgan said bad derivatives bets had triggered about $2 billion of paper losses, a figure that turned into $4.4 billion of actual losses in the second quarter. One trader in the CIO, Bruno Iksil, took big enough positions in the credit derivatives markets to earn the nickname "The London Whale." He made at least some of the big bets that caused trouble for the bank, and has since left JPMorgan, a source said on Friday. Ina Drew, who headed the CIO, has also left, and offered to give back as much of her pay as the bank was contractually entitled take back, said Dimon, whose pay could be taken back as well. A spokesman for the bank said JPMorgan had accepted Drew's offer. The bank said it had moved the bad trades from the CIO, which invests some of the company's excess funds, to its investment bank. JPMorgan was one of the inventors of credit derivatives, and its investment bank is one of the biggest traders of the product on Wall Street. The CIO will now focus on conservative investments, JPMorgan said. The bank has taken a number of other steps to prevent these types of losses from repeating, including changing the way it limits risk taking in the CIO's office. "People feel good that the loss is largely contained at this point," said Nancy Bush, a banking analyst at independent research firm NAB Research. JPMorgan said later on Friday that its former CIO risk officer, Irvin Goldman, had resigned. Goldman "behaved with integrity and we wish him well," JPMorgan said.