JPMorgan's losses have surged higher than the bank's original $2 billion estimate by at least $1 billion, as shareholders filed lawsuits against the beleaguered investment bank, the New York Times reported.
The lawsuits, filed in federal court in New York by an Arizona trust and an individual shareholder respectively, claimed that JPMorgan misled investors about their faulty bets, ABC News reported.
Saratoga Advantage Trust filed a securities-fraud suit, and is seeking damages for its investors who bought JPMorgan stock in between April 13 — when CEO Jamie Dimon called concerns over the bank’s trading risk “a complete tempest in a teapot" — and May 10, when he announced the company's trading losses, Bloomberg Businessweek reported.
“The trades in question, however, were anything but a tempest in a teapot, and quickly went from bad to worse,” Saratoga Advantage Trust wrote it its complaint, according to Bloomberg. “During the week following the April 13 conference call, losses from the trades ballooned to as much as $200 million per day.”
When Dimon first disclosed the losses last Thursday, he hinted they could double in future business quarters; however, that increase "has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank," the New York Times reported.
A JPMorgan spokeswoman declined to comment, according to the Times, but the bank's actual losses will depend on day-to-day market fluctuations, as Dimon has indicated.
“These types of derivatives trades are at the center of the 2008 financial crisis,” Bruce Ventimiglia, CEO of Saratoga Advantage Trust, told ABC News. “The proper disclosure of what these banks are doing is critical to investors.”
The Federal Reserve is investigating the scope of the growing losses and the original bet, and Ina Drew, the banks CIO, has already resigned over the losses. More resignations are expected to follow, according to the New York Times