JP Morgan pays up to end CDO mis-selling case

The SEC has announced that it has settled a CDO mis-selling case with JP Morgan. The bank paid $153.6 million to settle the case without admitting or denying the allegations.

The SEC’s case centres on JP Morgan’s Squared CDO 2007-1, on which GSC Group served as asset manager. The regulator argued that investors were misled because they did not realise that hedge fund Magnetar was involved in selecting the portfolio while being short many of the same assets. The cashflow CDO contained a portfolio of structured finance CDOs accessed through credit default swaps.

The US regulator also says it is charging former GSC ABS head Ed Steffelin with defrauding investors by failing to disclose Magnetar’s involvement in the deal.