JP Morgan's $6.2bn London Whale trading debacle was born out of secretive trades and creative bookkeeping as the bank attempted to limit losses using a practice that one regulator called "make believe voodoo magic", a Senate investigation has concluded.

The report by the Senate subcommittee on investigations, published on Thursday, detailed a series of failures in which accounts were hidden and trades were valued incorrectly to minimize losses. It also alleged that regulators were kept in the dark, a head trader's concerns went unheeded and a $51bn trading portfolio ballooned to $157bn in three months.

The inquiry follows JP Morgan's own internal investigation in January and provides the first look into the emails and internal discussions at the bank around the infamous Whale trade. It centers on the secretive JP Morgan chief investment office, which accounted for as much as one-sixth of the bank's assets last year.

The 300-page report alleges that JP Morgan hid losses, did not share information with its regulators, and misled the public. The report also blames the bank's regulator, the Office of the Comptroller of the Currency, and recommends reforming the way regulators oversee derivatives, the complicated financial instruments that played a role in the Whale trades and the financial crisis.

The report also concludes that JP Morgan CEO Jamie Dimon, whose bonus was cut in half to $11.5m last year, knew about the sustained trading losses when he dismissed the incident as a "tempest in a teapot" in April 2012.

The report precedes a Senate hearing on Friday in which key players will testify, including former JP Morgan chief investment officer Ina Drew. Dimon will not take the stand.

Surprisingly, the report presents Bruno Iksil, the head trader of JP Morgan's chief investment office, in a sympathetic light. According to Iksil, a head trader who earned the title of the "London Whale" in media reports because he was thought to be in charge of large trades, he loudly objected to the directives of his bosses, including Achilles Macris and Javier Martin-Vartajo.

He called their instructions "idiotic", predicted more losses as early as January 2012, and commiserated with a junior trader about how they were forced to put the wrong value on some of their trades. At one point, those wrong values caused JP Morgan's trading partners to loudly object and call for $690m in collateral from the bank.

Iksil said he also encouraged the bank to unwind the trades, but he believed his bosses were still hoping the trades would be profitable and were unwilling to accept how much money that would cost.

As early as January 30, 2012, Iksil noted the failing trades and told his supervisor: "[W]e have to report a loss in the widening today," and said "we have to let the book simply die," implying that the portfolio of trades would fail. It would be three more months – in April – before press reports would unearth the growing losses, and at least June before JP Morgan put a stop to them according to the Senate.

"Mr Iksil sent Mr Martin-Artajo an email advising that they should just 'take the pain fast' and 'let it go'," the report said. "But according to Mr Iksil, his supervisor Mr Martin-Artajo disagreed and explicitly instructed him to stop losing money."

JP Morgan promised regulators it would reduce the size of its bets, according to the Senate committee, which maintained that the bank instead created a portfolio of trades that metastasized from $4bn to $51bn in only three years, followed by a three-month "trading spree" that took it to $157bn.

The Senate's inquiry focuses on something called the Synthetic Credit Portfolio, a shadowy group of trades that metastasized to $157bn. While the SCP, as it is called, was designed to protect the bank from the vicissitudes of the market, the report alleges that it encouraged gambling with the bank's money, some of which consisted of federally insured deposits.

Many of the findings in the Senate report cover the same ground as JP Morgan's own internal investigation released in January. That investigation summed up the bank's own findings of its "flawed trading strategies, lapses in oversight, deficiencies in risk management, and other shortcomings."

The Senate report is more heavily footnoted and researched, however, as well as twice the length.

"While we have repeatedly acknowledged mistakes, our senior management acted in good faith and never had any intent to mislead anyone," a spokeswoman for JP Morgan said. "We cooperated fully with the Subcommittee's staff and welcome the opportunity to respond to the Senate's questions. We know we have made many mistakes related to the CIO matter, and we have already identified many of the issues cited in the report. We have taken significant steps to remediate these issues and to learn from them."

Last year, according to a Vanity Fair profile, Dimon told employees, "The London Whale drama has been harpooned, beached, eviscerated, cremated, and killed. So help me God! It's fish food."

The investigators did not speak to some of the key players, including head trader Bruno Iksil or his supervisors, Achilles Macris and Javier Martin-Vartajo. But they subpoenaed their emails and taped phone conversations to piece together the narrative.

The investigation paints a picture of a growing debacle that started with the bank's attempt to reduce the risk of its trades so that it would have a stronger capital cushion and look powerful to regulators. It started with the overconfidence of traders after a lucky bet made about $400m on the bankruptcy of American Airlines. Drew applauded the traders.

They suffered from that overconfidence when they bet incorrectly on the bankruptcy of Eastman Kodak in January 2012. That kicked off nine straight days of trading losses that cost the bank at least around $50 million. One trader in the CIO told the Senate committee that "they were told not to let an Eastman Kodak-type loss happen again." As the traders scrambled to keep the trades – which were designed to benefit if there was a financial crisis – they found that the improving bond market worked against them. Between January and March 2012, it didn't have one profitable day in its CIO portfolio, according to the report.

The Senate report uses JP Morgan to make an argument for financial reform, including requirements for more disclosure and Washington oversight of derivatives, the complex financial instruments that played a key role in increasing losses during the crisis.

The report also argues for the speedy adoption of the Volcker Rule, a key feature of the Dodd-Frank financial reform bill that is meant to prevent banks from taking gambles of their own. The Volcker Rule has been held up by lobbying efforts. Carl Levin, an author of the Senate report, was also the co-author of the Volcker Rule. He has signalled he will not run for re-election.