With the latest fine, the bank's total penalties for the London whale case top $1 billion. Last month, JPMorgan agreed to pay $920 million to settle charges brought by the Federal Reserve, the Comptroller of the Currency, the Securities and Exchange Commission and Great Britain's Financial Conduct Authority.
That's on top of the losses the trading ultimately cost the bank — an estimated $6.2 billion.
In a statement, JPMorgan said it neither admitted nor denied the CFTC's legal conclusion that there was a violation.
"We are pleased to be able to put behind us another aspect of the (Chief Investment Office) trading matter by the resolution of the CFTC investigation," the bank said.
The scheme, as outlined by regulators, was as simple as the financial instruments it involved were complex.
The bank had sold short a basket of credit derivatives, betting on their value to fall. Each month, traders had to report their profits or losses for the month, and in February 2012 they faced huge losses on a bet that had reached $65 billion in value. To drive down the price of the derivatives, JPMorgan sold another $7 billion of the instruments short in one day, which reduced losses on the bank's existing bets by creating artificial selling pressure, regulators said.
"They were short protection, and they sold more protection,'' the commission said in its statement. "The Commission is now better armed than ever to protect the market from traders, like those here, who try to 'defend' their position by dumping a gargantuan, record-setting, volume of swaps virtually all at once, recklessly ignoring the obvious dangers to legitimate pricing forces."
Despite the newest London whale settlement, JPMorgan still faces a criminal investigation of the trading episode! by federal prosecutors. Two former JPMorgan employees involved in the London whale trades are also facing federal criminal charges and SEC civil charges.
JPMorgan, the nation's largest bank, is under intense scrutiny from multiple regulators for its conduct in a variety of matters before and since the 2008 financial crisis.
Last week, the bank said it had set aside $23 billion in reserves to pay for settlements and litigation expenses. It is currently negotiating a settlement with the Justice Department over its handling of mortgage-backed securities that could reach a reported $11 billion. Including settlements already paid out, and others for which it has not yet established reserves, JPMorgan said its exposure to claims stemming from the financial crisis could top $36 billion.
The bank reported a $380 million loss for the third quarter after increasing those reserves by $9.2 billion.
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