UPDATE 1--U.S. indicts ex-traders in JPMorgan 'London Whale' scandal
* Martin-Artajo, Grout each indicted on 5 counts
* Defendants accused of scheming to hide losses
By Jonathan Stempel
NEW YORK, Sept 16 (Reuters) - A U.S. grand jury has indicted two former JPMorgan Chase & Co traders at the center of the bank's "London Whale" scandal, court papers made public on Monday show.
Javier Martin-Artajo and Julien Grout were accused of hiding hundreds of millions of dollars of losses within JPMorgan's chief investment office in London by marking positions in a credit derivatives portfolio at inflated prices.
Those losses were part of an overall $6.2 billion trading loss suffered by the bank centered on Bruno Iksil, the former trader known as the London Whale. Martin-Artajo supervised Iksil, while Grout worked for Iksil.
According to the indictment, Martin-Artajo and Grout from March to May of 2012 artificially inflated the value of securities "to hide the true extent of significant losses" in a trading portfolio.
The indictment said both men did this to enhance their prospects for promotions and bonuses, while Martin-Artajo hoped to stop JPMorgan from moving the trading portfolio to another division, and Grout wanted to curry favor with his supervisor.
Martin-Artajo and Grout were each charged by the grand jury with five criminal counts, including securities fraud, wire fraud, conspiracy, making false filings with the U.S. Securities and Exchange Commission and falsifying books and records.
The government wants the men to forfeit proceeds traceable to their alleged offenses, including compensation from the largest U.S. bank. The case was assigned to U.S. District Judge Lorna Schofield in Manhattan.
JPMorgan is not a defendant in the criminal case, but is nearing civil settlements with U.S. and European regulators that could result a $700 million payment, a person familiar with the matter said on Monday.
Richard Smith, a lawyer for Martin-Artajo, did not immediately respond to requests for comment. Edward Little, a lawyer for Grout, had no comment.
Julie Bolcer, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment. JPMorgan spokesman Brian Marchiony declined to comment.
Iksil has not been criminally charged, and has been cooperating with U.S. authorities.
U.S. prosecutors charged Martin-Artajo and Grout last month. Grout sought to avert a formal indictment by portraying himself as an unwitting victim of manipulation by superiors, a person familiar with the matter said last week.
Authorities in the United States needed an indictment against Martin-Artajo to proceed with his extradition from Spain, where he was arrested and released in August. Martin-Artajo is Spanish, while Grout is French.
The case is U.S. v Martin-Artajo et al, U.S. District Court, Southern District of New York, No. 13-cr-00707.
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