BlueCrest's Platt Sees Disaster For JPMorgan In Euro Crisis

May 22 2012 | 11:12am ET

BlueCrest Capital Management founder Michael Platt says that JPMorgan Chase is not out of the woods yet when it comes to its $2 billion trading loss earlier this month.

Platt, whose firm is a counterparty to a "small" number of the bank's bad bets, told Bloomberg Television that his former employer is "not out of those positions."

"If we end up with a catastrophe in Europe in the short run, they're probably not positions that anyone would want to have."

"The order of events would be a Greek exit [from the euro], shock wave across Europe, massive stress in banks, Spain turns into the battleground for the euro, because of the stresses in their own banking system," Platt said, laying out JPMorgan's nightmare scenario. "Then we either get a very swift and strong European solution or we get a hugely disordered meltdown in Europe."

Platt's words aren't the first indication that JPMorgan could be on the hook for an even bigger disaster. Other counterparties have said that the markets, fueled by hedge funds seeking to profit from the bank's pain, have moved even further against JPMorgan's credit-default swap index bets. JPMorgan CEO Jamie Dimon himself has admitted that the loss could grow to $3 billion this quarter alone.

For his own firm's part, Platt said BlueCrest found "anomalies" in the pricing of some of the JPMorgan credit derivatives. The hedge placed bets designed to profit from a price correction.

Platt also dismissed Dimon's claim that the CDS investments were hedges on the bank's other credit assets.

"I don't think they could be described in any way as a hedge," he said. "I think it's a trading loss. They deliberately put the positions on. The London whale"—Bruno Iksil, the JPMorgan trader who built the trades and who is now leaving the firm—"who has subsequently been harpooned, put the positions on."


In Depth

Q&A: TCA Fund Management's Bob Press on Small-Cap Private Equity

Aug 25 2016 | 8:55pm ET

The emergence of private credit as a replacement for traditional bank financing...

Lifestyle

Kiawah: Island Reversal

Aug 24 2016 | 9:59pm ET

Looking for real estate investments but the typical real estate fare isn’t cutting...

Guest Contributor

Old Hill Partners: Embrace Illiquidity

Aug 9 2016 | 2:39pm ET

The age-old financial concept that higher yields are the result of higher risk and...