January 08, 2013

James "Jes" Staley is leaving his job as chairman of the investment banking unit of JPMorgan Chase & Co to join a hedge fund that profited from the bank's $6.2 billion derivatives loss at the hands of the "London Whale" trader.

The 56-year-old Staley, who was moved aside in July from his position as chief executive for investment banking at JPMorgan, is becoming a partner at BlueMountain Capital Management, the hedge fund company said on Tuesday.

The change takes Staley to a firm that can trade and make deals with more freedom than JPMorgan or other banks, which face stricter regulations in the aftermath of the financial crisis.

Staley said in a statement from BlueMountain he is glad to be making the move at a time of "sea changes in the financial industry."

At Blue Mountain, he will focus on cultivating relationships with clients and developing new strategies, the firm said, echoing the kind of talk about financial innovation that used to be routine at investment banks.

Staley will buy a stake in BlueMountain, and the money will be used on new technology and staff, the firm said. The amount of his investment was not disclosed.

Staley spent nearly 22 of his 34 JPMorgan years at its investment bank. He was a founding member of its equities business in the early 1980s. He later worked as CEO of its asset management unit, which includes its private bank.

Staley's work was embraced by CEO Jamie Dimon after Dimon came to the bank in 2004 and he had been mentioned as a possible successor to Dimon. But in July he was sidelined in a management reshuffle that foreshadowed his departure.

As Dimon reorganized business units, he named two younger executives to be co-CEOs of commercial and investment banking and made Staley chairman of the unit and head of a committee to consider the future of global banking.

Dimon said at the time that Staley understood the need to make room for younger executives so the company could keep and train potential CEO successors. Staley and Dimon are the same age.

Staley was not immediately available for comment on Tuesday, a BlueMountain spokesman said.

Staley will become its ninth managing partner. The firm, with more than $12 billion in assets, was among a group of hedge funds that profited by taking the other side of JPMorgan trades in derivatives at the hands of the London Whale, the market nickname for trader Bruno Iksil.

Later, BlueMountain worked for JPMorgan to help the bank close the positions, according to a person familiar with the matter. The bank ultimately lost $6.2 billion on the trades.

The Whale trades were made through JPMorgan's chief investment office in London, which was a separate business unit from the investment bank.

Dimon, in a memo to senior managers after the announcement of Staley's departure, said, "BlueMountain is an important client of ours, and we look forward to working with Jes in the future."

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