The Real Deal Miami

SEC launches probe into JPMorgan’s subprime mortgage dealings

November 02, 2010 12:30PM

JPMorgan CEO Jamie Dimon

The U.S. Securities and Exchange Commission has launched an investigation into whether JPMorgan Chase secretly helped hedge fund Magnetar Capital bet against the same subprime mortgages the bank was simultaneously selling to investors, ProPublica reported. The probe surrounds a $1.1 billion collateralized debt obligation, or CDO, called Squared, which was tied to subprime mortgage assets that Magnetar is suspected of having hand-picked with the bank’s help. JPMorgan, which ultimately lost $880 million on the deal (though Magnetar gained $290 million), is one of several peer firms under investigation for their practices related to mortgage investments around the time the housing market began to sour. Goldman Sachs agreed to a $550 million settlement with the SEC in July over claims that the company helped John Paulson bet against a bundle of mortgage bonds it was also selling to customers. [ProPublica]