JPMorgan Puts Veteran CDS Trader On Leave Over WhatsApp Use

Anyone who has traded CDS has inevitably transacted with JPMorgan’s Ed Koo, who most recently headed JPMorgan’s single name CDS desk and who over the the past two decades, due to his corporate cash bond coverage, was axed across the entire credit spectrum giving him a unique view over the IG market. It also made him a virtually assured counterparty to any buysider who bought or sold credit protection. But no longer.

According to Bloomberg, Koo was placed on leave “as the bank reviews whether he broke its policies by using WhatsApp group chats with colleagues” in discussions that included market chatter, suggesting he may have tried to circumvent or avoid the traditionally monitored communication venues such as Bloomberg chat. While so far the probe so far hasn’t indicated any improper activity, the bank hasn’t ruled out taking action against other members of the group, a Bloomberg source said.

Meanwhile, JPM’s decision to force someone of Koo’s standing off the trading floor while it looks into the matter “is indicative of the seriousness with which banks are grappling with the profusion of new communication platforms.” Unlike traditional chat platforms such as email or Bloomberg, WhatsApps messages are encrypted from start to finish, and can’t easily be monitored by a compliance department, a problem for firms that need to make sure their employees aren’t engaging in illegal activity like fraud or insider trading.

As a result, Bloomberg notes that “many firms are unsure of how to handle WhatsApp. Employees often use it for talking to friends and coordinating their social lives, which makes it hard for banks to outlaw altogether.” Of course, employees also use it to plot insider trading.

Koo was one of JPMorgan’s main traders of credit-default swaps tied to individual companies; his role expanded to cover the entire IG space following the 2011 departure of veteran Eric Pitt who ran JPM’s North American IG and derivatives trading. In recent years, Koo got a bigger role last year under investment-grade trading head Nicholas Adragna, and has also had oversight of JPM’s entire portfolio trading space.