The following article is brought to you by Jia Lyn Yang at the WashingtonPost.Com.
A class-action lawsuit was filed Tuesday against JPMorgan Chase on behalf of investors accusing the bank of misleading shareholders about the $2 billion in trading losses that have roiled the company this week.
Lawyers said the bank did not fully disclose the risky nature of JPMorgan’s trades. The lawsuit alleges the bank falsely told shareholders that its bets on financial instruments known as derivatives were “hedges” that would help the firm offset overall risk in its portfolio. Instead, lawyers say, the bank was betting purely for profit and did not fully disclose how much money the bank had already lost before by the time it held an April 13 conference call with investors.
Sen. Bob Corker, a Republican who serves on the Senate Banking Committee, has called for a hearing on the $2-billion trading loss by JP Morgan, saying that “policies are going to be derived out of what’s happened.”
JPMorgan shareholder meeting draws protesters: JPMorgan Chase, the nation’s largest bank, held its annual shareholder meeting in Tampa on May 15, just days after it disclosed its $2 billion trading blunder. Protesters came out to show their disapproval of the company.
The result was that JPMorgan’s stock price traded at “artificially inflated prices,” the lawsuit alleges.
“These derivative bets went horribly wrong, resulting in billions of dollars in lost capital for the Company and billions more in lost market capitalization for JPMorgan shareholders,” said a press release from Murray Frank LLP, the law firm that filed the suit in U.S. District Court for the Southern District of New York.
The law firm is still seeking a lead plaintiff for the lawsuit and others who bought the company’s stock between April 13 and May 10.
JPMorgan declined to comment Wednesday morning.
The bank has come under increasing pressure in the last week about the exact nature of its trades. The Justice Department has begun an inquiry into the bank’s losses, a law enforcement representative said Tuesday.