SEC Investigating JPMorgan Over ‘Squared’ CDO

By
Photo: Mary-Louise Price; Photos: Mark Wilson/Getty Images

The SEC is investigating whether JPMorgan, like Goldman Sachs, might have allowed a hedge fund to improperly select assets for a $1.1 billion collateralized-debt obligation it called "Squared." According to ProPublica, the bank may have knowingly allowed Magnetar to fill Squared with bonds it knew were shit so that the hedge fund could short it, then marketed the CDO to investors as though it were, in fact, Shinola.


One participant in the deal told ProPublica that Magnetar pushed the bankers to select riskier bonds. "They really cared about it," this person said [11]. "They wouldn't pull punches. It was always going to be crappier assets."

When the subprime market tanked, Magnetar made $290 million on the deal, while JPMorgan made $20 million. Shares of JPMorgan are only down by like 30 cents on reports of its alleged skulduggery, thanks to Goldman Sachs's precedent-setting $550 million, slap-on-the-wrist settlement earlier this year over its similar Abacus deal.

SEC Investigating Deal Between JPMorgan and Hedge Fund Magnetar [ProPublica]