JP Morgan Chase faces federal regulatory action over a scheme which manipulated energy prices in two US states, the New York Times reported Friday.

The Times said it had seen a 70-page government document which indicated staff from the Federal Energy Regulatory Commission intended to recommend action over the bank’s dealings in California and Michigan.

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According to the Times, the case arose after JP Morgan’s takeover of Bear Stearns in 2008, which gave the bank the right to sell electricity from power plants in the two states.

Investigators said initiatives instigated by the bank transformed loss-making power plants into “powerful profit centers.”

Eight schemes launched by traders in Houston between September 2010 and June 2011 saw energy offered at prices “calculated to falsely appear attractive” to state energy firms.

Authorities in California and Michigan released $83 million in “excessive” payments as a result of the scheme, the Times report said.

JP Morgan has denied wrongdoing, insisting the trading in question was legal and “in full compliance with the applicable rules.”

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The Times report said JP Morgan was also coming under pressure from other regulators.

The Office of the Comptroller of the Currency was studying enforcement actions against the bank over the way it collected credit card debt as well as its possible failure to alert authorities about suspicions surrounding fraudster Bernard Madoff.