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FRAUD

Rogue JPMorgan trader arrested in Spain

Spanish police arrested on Tuesday a former JPMorgan Chase trader wanted by the United States on criminal charges in the massive "London Whale" fraud case.

Rogue JPMorgan trader arrested in Spain
The headquaters of JPMorgan Chase & Co. in Manhattan, New York City. Photo: Spencer Platt/Getty Images North America/AFP

Officers arrested Spanish national Javier Martín-Artajo Rueda on an international detention request issued by the United States for alleged fraud and tax crimes, police said in a statement.

After locating Martín-Artajo, Spanish police spoke to him and managed to get him to appear at a police station where he was arrested on Tuesday morning, police said, without giving further details.

"The detainee is suspected of being responsible for manipulating and inflating the value of positions on his firm's credit portfolio," the police statement said.

The suspect was taken to appear before an investigating judge in Madrid's National Court.

Martín-Artajo is accused of being a senior figure in the 2012 "London Whale" trading scandal involving $6.2 billion in trading losses at US banking giant JP Morgan.

US federal prosecutors filed criminal charges on August 14 against Martín-Artajo and Frenchman Julien Grout, alleging the two men kept false records on the trades, committed wire fraud and submitted false US securities filings.

The charges were the first criminal case to stem from last year's mammoth trading loss. The Securities and Exchange Commission also filed parallel civil charges against the two men alleging securities fraud.

A third ex-JPMorgan official involved in the trades, French national Bruno Iksil — originally identified as the "London Whale" responsible for the trades — was cleared of criminal responsibility after cooperating with prosecutors.

Martín-Artajo, 49, is a Spaniard who usually resides in London, while Grout, 35, resides in his native France.

According to US prosecutors, Martín-Artajo was the most senior of the three employees.

The US complaint documents how the London team allegedly falsified financial records after Martin-Artajo was pressured from higher-ups about losses in early 2012.

Martín-Artajo directed underlings to discount the losses and count positions in ways that departed from company practice of pricing assets at mid-market levels, according to the complaint.

It cites phone calls and emails from the Iksil, who is identified only as a "co-conspirator not named as a defendant."

Iksil is depicted in the complaints as a generally unwilling participant in the cover-up, urging Martín-Artajo to revise pricing practices to more accurately reflect losses and taking steps to document and highlight the growing gap between the division's reported and actual losses.

At one point, Martín-Artajo allegedly fought with Iksil after he reported in an email a single-day trading loss of $40 million. Martin-Artajo erupted at the document, saying putting the information in an email "just creates more tension", according to a recorded phone call.

As a result of the false records, JPMorgan in July 2012 restated losses from its corporate private equity division, which included the London trading operation, by $459 million.

The defendants each face a maximum sentence of 65 years in prison when all the criminal charges are combined, and in addition a fine of $5 million, or twice the gross gain or loss from the offences, whichever is greater.

Civil penalties in the SEC case include paying back ill-gotten gains and a fine.

The debacle led to senior bank resignations, slashed pay for JPMorgan chief executive Jamie Dimon and sparked a plethora of government probes.

The London whale case is one of several regulatory headaches still facing JPMorgan. The bank also faces probes on its sale of mortgage-backed securities, among other issues

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BANKING

Card over cash? Why Germany is seeing a new payment preference

Cash has long been king in Germany, with many smaller retailers refusing to join the rest of the world in adopting contactless payment systems. But card-based payments are on the rise, as recent stats about Girocard use reveal.

Card over cash? Why Germany is seeing a new payment preference

Germany has long been a very cash-based country, occasionally to the dismay of frustrated tourists at the Döner shop.

A few German phrases express the people’s love of physical money. There’s ‘only cash is true’ – Nur Bares ist Wahres. Or Bargeld lacht, literally meaning cash laughs, but used to imply that cash is what’s wanted, similar to ‘cash is king’ in English.

But the classic German preference for cash appears to be evolving, as the use of girocards is growing, even for small transactions.

How are girocards being used?

Girocard, an ATM and debit card service offered by German Banks, was designed to allow customers to use virtually all German ATMs and, increasingly, to make purchases at businesses.

READ ALSO: Ask an expert – Why is cash still so popular in Germany, and is it changing?

Last year, consumers in Germany used their Girocard more often than ever before for cashless payments. A total of €7.48 billion payment transactions with the plastic card were counted – 11.5 percent more than in the previous record year 2022, according to figures published by the Frankfurt-based institution Euro Card Systems.

Whether at the bakery, petrol station or supermarket, customers are increasingly pulling out their cards at the checkout, even for smaller amounts. As a result, the average amount paid with the Girocard fell from €42.34 to €40.69 within a year. 

The rise of card payments in Germany

Contactless payment, which is possible with girocards and credit cards that have an NFC chip, got a boost during the Covid pandemic, as retailers promoted it for hygiene reasons. 

But the use of card payments has continued to grow in Germany since then, boosted partly by the increasing use of girocards.

Promoting the use of girocards, some German banks have expanded their cards’ functions: Sparkassen, Volksbanken, or Raiffeisenbanken offer girocards for the digital wallet, for example.

Banks want to continue upgrading the payment card with further applications. For example, a project is being tested which would add an age verification function to girocards that would be useful when a customer is buying cigarettes.

On the retail side, it’s clear why the Girocard is preferred to other debit options.

“We see that debit cards from international providers cost up to four times more,” Ulrich Binnebößel, Head of the Payment Systems & Logistics Department at the German Retail Association (HDE) told DPA.

What’s the difference between the Girocard and other debit?

The Girocard is a strictly German phenomenon. It can be seen as the latest iteration of the EC card, which was created to consolidate payment systems following the unification of former East and West Germany.

In 1991 different debit card systems, including Eurocheque guarantee cards from former West Germany and Geldkarte ATMs from former East Germany, were unified into Eurocheque cards.

Then in 2001, the Eurocheque system was disbanded, but German banks continued to use the EC logo for “electronic cash’” cards, or EC cards. In 2007, the German Banking Industry Committee introduced Girocard as a common name for electronic cash and the German ATM network.

Girocards are only issued and accepted in Germany, so if you want to get one of your own, you’ll have to join a German bank, and shell out those notorious German banking fees.

READ ALSO: Why it’s almost impossible to find a free bank account in Germany

Alternatively, you can get by with internationally accepted debit cards provided by a bank in your home country, or otherwise by joining an app-based European banking service like N26. 

But be warned, without the Girocard in hand, at some smaller retailers you may be told, “Leider nur Bargeld oder EC-Karte.

With reporting by DPA

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