Three recent high-profile cases involving JPMorgan, along with a
post-Enron reluctance on the part of clients to enter into opaque
off-balance-sheet transactions, might spell the beginning of the
end for sovereign credit derivatives. These are not golden days,
after all, for financial markets plagued with illiquidity and
mistrust.
JPMorgan has issued one public statement maintaining a stout
defence: "JP Morgan fully complied with the plain language and
spirit of the contractual terms of the governing agreements." A
study of the court documents relating to the three cases, and
discussions with lawyers, reveals a dense and complex chain of
arguments that has not yet been fully understood by many market
participants.
The largest case pending against JPMorgan is a suit seeking more
than $90 million in compensatory damages and more than $100 million
in punitive damages filed by Daehan, a Korean investment trust.
Daehan was sold $96 million of 10.20% Emerging Market Basket Notes
in...
