Government authorities plan to arrest two former JPMorgan Chase employees suspected of masking the size of a multibillion-dollar trading loss, a dramatic turn in a case that tarnished the reputation of America's biggest bank and spotlighted the perils of Wall Street risk-taking.
The former employees, who worked in London, could be arrested in the coming days, according to people briefed on the matter. The action, the people said, would involve criminal fraud charges.
Javier Martin-Artajo, a manager who oversaw the trading strategy from London, and Julien Grout, a low-level trader responsible for recording the value of the soured bets, could ultimately be extradited under an agreement with British authorities. Yet the people briefed on the matter, who spoke on the condition of anonymity, cautioned that it is unclear whether British authorities will be able to locate the men, who are natives of other European countries.
Representatives for the FBI and the US attorney's office in Manhattan declined to comment, as did a spokesman for JPMorgan. A lawyer for Mr Martin-Artajo did not respond to an email. A lawyer for Mr Grout could not be located.
The plan to arrest the traders hints at an aggressive new stance by the government, which has come under fire for prosecuting only a few Wall Street employees tied to the 2008 financial crisis.
Taking aim at employees of a Wall Street giant like JPMorgan, even when they fall below the executive ranks, could send a warning to employees across the financial industry.
The losses at the heart of the JPMorgan case stemmed from outsize wagers made by the traders at the bank's chief investment office in London. The traders used derivatives - complex financial contracts whose value is typically tied to an asset like corporate bonds - to bet on the health of large corporations such as American Airlines.
Those trades soured last year, racking up steep losses for the bank. JPMorgan, which initially disclosed the problem in May 2012, has announced that the losses reached more than $6 billion.
After more than a year of gathering evidence on the bet, federal prosecutors and the FBI in Manhattan have concluded the two employees understated the value of their trades to hide the problem from executives in New York.