Legal News

JPMorgan’s $200 Million Dollar “Unfortunate” Derivatives Contract
Download PDF
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

 

Past performance is not indicative of future results. This brief disclaimer shows itself everywhere securities are sold. This is not even in fine print. The real fine print along with endless contractual pages are barely read by investors. Often times, contracts that are less than transparent, such as derivatives contracts, can be misunderstood by parties entering into those contracts.

The responsibility is on the person entering into the contract to read and understand the nuances of that contract. In the case of JP Morgan Chase & Co, and BVG, Berlin’s public transport provider, the Berliner Verkehrsbetriebe has found itself in a $200 million dollar loss. Bloomberg notes that JPMorgan comments “BVG has only itself to blame for signing an unfortunate derivatives contract” that ended up in $200 million in losses. But the financial giant notes that things could have gotten worse, as the loss “coincided with the start of the global financial crisis.” JPMorgan noted that BVG looked for a scapegoat rather than to face the simple truth that their bet went sour. Finally, JP Morgan had to sue the transportation company to try to get some of its money owed back- with interest.

  
What
Where


Bloomberg notes that JPMorgan’s staff is accused of “shutting their eyes” when BVG did not understand the complexity of the credit derivative contracts. But to be fair, there are very few PhDs and quants who can actually tell you every detail of derivatives from alpha, beta, delta and gamma. The contracts tend to be quite complex as credit swaps and derivative trenches grow in size in a portfolio. Inherently, the bet is low in risk, because the risk is spread over quite a few consumers. However the tail risk cannot be downplayed- and in the case of a black swan, as what happened in the defaults and crisis, the markets were in turmoil.

BVG feels that without experience in this area, they were mislead by JPMorgan. They believe that JPMorgan downplayed the risks and did not fairly represent those tail risks. They also feel that Clifford Chance , the lawyers who advised them and who also advised JPMorgan regarding the contracts, had a conflict of interest. At this time, BVG is trying to have its case heard in Germany, on home turf. JPMorgan for three years attempted to get this case heard in the UK. Justices from the EU in 2011 ruled that JPMorgan can have its case heard in Britain. At this time the trials are expected to last approximately two and a half months.

Image Credit: JPMorgan Access.com

Get JD Journal in Your Mail

Subscribe to our FREE daily news alerts and get the latest updates on the most happening events in the legal, business, and celebrity world. You also get your daily dose of humor and entertainment!!






 

Interesting Legal Sites You May Like


BCG FEATURED JOB

Locations:

Keyword:



Search Now

Mid-level Litigation Attorney with motions experience

USA-WA-Seattle

Seattle office of our client seeks mid-level litigation attorney with 3-5 years of experience, inclu...

Apply Now

Environmental /Land Use Attorney with 2-3 years of experience

USA-CA-San Francisco

San Francisco office of our client seeks environmental /land use attorney with 2-3 years of experien...

Apply Now

Litigation Attorney with 2-5 years of insurance defense experience

USA-FL-Jacksonville

Jacksonville office of our client seeks litigation attorney with 2-5 years of previous insurance def...

Apply Now

Land Use, Zoning Attorney with 2-6 years of real estate experience

USA-NY-Fishkill

Fishkill office of our client seeks land use, zoning and development attorney with 2-6 years of comm...

Apply Now

RELEVANT JOBS

Experienced Insurance Defense Attorney Needed

USA-NY-Bohemia

Insurance Defense firm (with 15 attorneys in Suffolk and Mineola location), seeks attorneys with 5+ ...

Apply now

Corporate / Commercial Attorney | Lebanon, NH

USA-NH-Lebanon

Downs Rachlin Martin PLLC seeks an experienced corporate / commercial attorney to join its Lebanon o...

Apply now

Business Law Junior Associate | Burlington, VT

USA-VT-Burlington

Downs Rachlin Martin seeks associate attorney with 1-3 years of experience to join its Commercial an...

Apply now

Business Law Associate | Burlington

USA-VT-Burlington

Downs Rachlin Martin is seeking an attorney with 4 to 8 years of experience to join its very busy pr...

Apply now

Most Popular

SEARCH IN ARCHIVE

To Top