* Whale's supervisor gains time to fight handover to U.S.
* Eventual extradition seen as likely
* Spanish government will weigh 'reciprocity' with U.S.
By Sarah White and Clare Hutchison
MADRID/LONDON, Aug 28 By getting arrested in his native Spain rather than his former London workplace, ex-JPMorgan Chase trader Javier Martin-Artajo has gained time in his struggle to avoid being extradited to New York over a $6.2 billion trading scandal.
But he may just be postponing the inevitable, extradition lawyers say.
Martin-Artajo, detained in Madrid on Tuesday and later granted a conditional release, has said he will resist being sent to the United States, where prosecutors accuse him of hiding hundreds of millions of dollars in losses.
The Spaniard was the London supervisor of Bruno Iksil, nicknamed the "London Whale" for the big derivatives bets that led to last year's losses at JP Morgan.
The scandal dented the reputation of the bank, the largest in the United States, which had weathered the global financial crisis better than most competitors. Its problems have since grown, and it is also embroiled in a federal bribery investigation and is facing multi-billion dollar lawsuits over subprime mortgages.
Iksil is cooperating with U.S. prosecutors and has not been charged, while Frenchman Julien Grout, a junior colleague, has been charged but not arrested. Martin-Artajo is the most senior figure arrested so far.
Lawyers expect the case to drag out, though in principle he is eligible for extradition because the alleged offences are also punishable in Spain.
"Whilst the extradition process is known to be slow and tortuous .... it is difficult to see at this stage how extradition can realistically be avoided," said James Carlton, a partner at London-based law firm Fox Williams.
But lawyers say being arrested in Spain was Martin-Artajo's best option, short of fleeing to a country like Cuba with no diplomatic ties with the United States.
Spain, according to its extradition treaty with the United States, is not obliged to hand him over. And any decision by Spanish authorities is normally preceded by a detailed review of whether there is a case to be answered.
That would not have been so in Britain, where authorities first received a warrant for Martin-Artajo's arrest but were unable to find him, according to a Spanish police source.
Having family ties in Spain has also helped his treatment by the law so far, according to a Spanish lawyer who asked not to be named. The lawyer added that the High Court might otherwise have deemed him a flight risk and jailed him.
"We made it clear there were some advantages to being detained in Madrid, ... he has family here, roots," said an inspector at the Spanish police unit that contacted Martin-Artajo's family to persuade him to hand himself in.
Some Spaniards have been successfully extradited to the United States, court filings show, including in drug-related cases. Other requests have been denied on medical grounds or in cases eligible for the death penalty.
Ultimately, Spanish government officials and the cabinet have the final say. They, rather than the High Court, will consider reciprocity, the balance of whether the United States responds to Spanish requests in equal measure, the Spanish lawyer said.
"This looks like it could end up being more of a government decision," she added. A source at Spain's justice ministry said the cabinet had not gone against court decisions in recent years.
If tried in Spain, Martin-Artajo could face lesser penalties than the term of up to 25 years he risks in the United States.
New York prosecutors, however, have been buoyed by successes in other European extraditions, and have been using one recent case involving a former British trader at Credit Suisse as a template for the "London Whale" one.
There the British citizen, one of three charged with fraud for mismarking prices in their portfolio of credit-default swaps, was extradited to New York and pleaded guilty.
While Martin-Artajo worked at JPMorgan in London, prosecutors have been poring over communications between the London team and U.S. regulators or bank employees, which they believe give them jurisdiction in the case.
But the fact U.S., rather than British, authorities are bringing the charges could be one weakness in the extradition case, some lawyers said.
"It's foreseeable that the defence team will dispute...the competence of the United States over this case," said another Spanish lawyer, on condition of anonymity.
The United States now has just under 40 days to provide the Spanish High Court with evidence to back up its request. Martin-Artajo, who is not allowed to leave Spain, will also have to formally declare his position on extradition before a judge.
A London lawyer for Martin-Artajo could not be reached for comment. Earlier this month Martin-Artajo had said through lawyers that he was away on a long-planned vacation and that he expected to be cleared of wrongdoing.
Grout, the other employee charged, cannot be extradited if he remains in France, although a source with knowledge of the matter has said Grout would offer to face the charges in the United States on condition he is granted bail.