JPMorgan Executive To Face Charges Over Magnetar CDO

Apr 13 2011 | 4:29pm ET

Two men, including a former JPMorgan Chase executive, have been warned that they will likely face Securities and Exchange Commission lawsuits for their alleged roles in misleading investors about a collateralized debt obligation allegedly structured and marketed on behalf of hedge fund Magnetar Capital.

Michael Llodra, formerly global head of structured product CDOs at JPMorgan, and Edward Steffelin, a former executive at GSC Group, received Wells notices from the SEC in January. The regulator issues Wells notices when it is planning to bring a civil action against individuals or firms.

News of the impending lawsuits comes just weeks after it emerged that JPMorgan is seeking to settle the SEC's regulatory investigation of the $1.1 billion CDO, called "Squared." The allegations against JPMorgan broadly parallel those against Goldman Sachs, which settled an SEC lawsuit last year for $550 million.

The SEC apparently believes that Magnetar had an undisclosed hand in selecting the securities that went into Squared. Magnetar had been betting against the sort of subprime mortgages that comprised the Squared CDO; the hedge fund denies any wrongdoing, and has not been accused of such.

JPMorgan was the underwriter of the 2007 CDO, which GSC managed. Neither Llodra nor Steffelin remain with those firms, the former having left to join Harvard Management Co. in 2008. GSC has since filed for bankruptcy.


In Depth

Q&A: Decathlon Capital On Revenue-Based Alternative Lending

Oct 30 2017 | 3:49pm ET

The explosion in private credit activity since the end of the financial crisis is...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Saxby: Not All EBITDA Is Created Equal

Nov 30 2017 | 8:02pm ET

Record levels of dry powder are driving competition among private equity firms to...