Federal authorities, seeking to bring criminal charges against two former JPMorgan Chase employees at the center of the bank’s multibillion-dollar trading loss in London last year, are facing logistical hurdles in planning their arrests.
One of the employees remains on vacation while the other has moved back to his native France, complicating plans to extradite them under an agreement with British authorities. A third employee, Bruno Iksil, has reached a so-called nonprosecution deal with federal investigators in Manhattan that will shield him from charges as long as he cooperates against his two former colleagues, according to people briefed on the matter.
The colleagues include Javier Martin-Artajo, who oversaw the trading strategy from the bank’s London offices. Lawyers for Mr. Martin-Artajo broke their silence on Tuesday to say that he was “currently on a long-planned vacation and will be returning†to London “as scheduled.†The lawyers, from Norton Rose Fulbright, declined to say when he would return, adding that authorities did not instruct him to postpone his vacation.
The other colleague, Julien Grout, left London this year for for France, which typically does not extradite its citizens. Mr. Grout’s lawyer, Edward Little, explained that his client moved after losing his job with JPMorgan in December. Mr. Grout, his lawyer said, moved his belongings to France and spent a brief period in the United States, where his wife’s family resides. The move, his lawyer said, came long before media reports surfaced last week that the former trader could be arrested.
“He has absolutely no intention of fleeing,†Mr. Little said.
The authorities need not need to wait for the employees to return to London to bring charges. Even without arrests, people briefed on the matter said, prosecutors and the F.B.I. in Manhattan could announce the charges as early as this week.
Federal prosecutors and the F.B.I. in Manhattan spent more than a year investigating Mr. Martin-Artajo and Mr. Grout for their roles in the loss at JPMorgan. The authorities, according to people briefed on the matter, suspect Mr. Martin-Artajo instructed lower-level traders, including Mr. Grout and Mr. Iksil, to mask the size of the mounting losses last year.
Poring over internal e-mails and phone records, the authorities came to believe that the traders falsified internal bank records. JPMorgan eventually restated its first-quarter earnings for 2012, adjusting them down by $459 million last July amid concessions that the valuations were flawed.
Yet, Mr. Martin-Artajo’s lawyers said he “is confident that when a complete and fair reconstruction of these complex events is completed, he will be cleared of any wrongdoing.â€
Some legal experts have noted that the prosecutors face challenges to proving their case. Traders have some wiggle room to value their trades on derivatives contracts because the actual prices might not be immediately available. That leeway could pose a challenge for prosecutors who will have to prove that the traders intentionally masked the losses.
The case stems from a bet the traders built over many months. Deploying derivatives â€" complex financial tools whose value is linked to an asset like a corporate bond â€" the traders made bets on the health of large corporations like American Airlines.
Those bets, which roiled the market and earned Mr. Iksil the moniker “the London Whale,†began to sour last year. The losses, which JPMorgan initially disclosed last May, has since swelled to more than $6 billion.
The investigation into the losses accelerated with help from Mr. Iksil. The trader, despite receiving public blame for the trade, gave multiple interviews to the United States authorities, both at a meeting in Brussels and later in New York. Before agreeing to visit New York, according to the people briefed on the matter, Mr. Iksil secured the nonprosecution agreement. Under the deal, Mr. Iksil will will not face criminal charges or a civil penalty from regulators as long as he cooperates with the case against the other traders.
Even as prosecutors prepare criminal charges against the other two traders, the United States attorney’s office and the F.B.I. in Manhattan are continuing a parallel investigation into JPMorgan’s failure to thwart the suspected misconduct. The bank could face a reprimand and a fine from the authorities.
Alongside the criminal case, the Securities and Exchange Commission is investigating the trade. In an unusually aggressive stance for the agency, the S.E.C. is looking to win an admission of wrongdoing from JPMorgan as a condition of any settlement. An admission would signal a pivot for the agency, which had allowed defendants for decades to “neither admit nor deny wrongdoing.â€
Together, the cases swing an unwelcome spotlight back on the bank, just as the nation’s biggest bank is grappling with an array of regulatory woes.
At least eight federal agencies are investigating the bank. One area of particular focus, according to people close to the matter, is the bank’s financial crisis-era mortgage business. Last week, the bank disclosed that federal prosecutors in California were investigating whether JPMorgan sold shoddy mortgage securities to investors before the 2008 financial crisis.
