JPMorgan (NYSE: JPM) receives another blow even as it flounders in the midst of a FERC power market manipulation probe and talks with U.S. regulators for its alleged involvement in rigging key benchmark interest rates.

On Friday, the financial bellwether revealed that the red ink on its disastrous bet on credit derivatives could build up to more than $7 billion. Federal regulators examining the botched trades are now conducting a probe into whether JPMorgan employees sought to defraud investors, according to people familiar with the situation. If traders misled investors to defraud them, they could be subject to criminal charges, securities law experts say.

Traders might have deliberately attempted to conceal the magnitude of the trading losses, the company said. An internal investigation sought to determine how traders in the bank's investment office were valuing their bets. Several emails and recorded transcripts of phone calls between traders led the bank's senior executives to suspect that traders had deviously marked their trades to hide the full extent of the losses.

The suspicion comes to light in the wake of a regulatory filing made by the bank early Friday morning, shortly before its second-quarter earnings were posted. In its earnings reports, the bank announced a profit of nearly $5 billion and trading losses of $5.8 billion -- a figure that fell between most analysts' expectations of losses ranging between $5 billion and $7 billion.

JPMorgan has also admitted that it would restate its first-quarter earnings as they were no longer reliable.  

The new probe into the actual magnitude of the losses makes the situation worse for the bank. Losses found to be more than $7 billion or as high as $9 billion, as confidential sources reported to media groups last month, could foster a debate about whether Chase CEO and Wall Street's doyen Jamie Dimon, is really fit to lead the bank, according to David Knutson, a Chicago-based analyst at Legal and General Investment Management, a European institutional asset management and investment firm.

With the latest discovery of a likelihood that losses could climb to over $7 billion, questions are also being raised in connection with whether risk and compliance systems across the whole bank are weak and inadequate.  

Meanwhile, the bank clawed back millions in pay from three of its London-based traders who were directly responsible for the trading debacle. They include Bruno Iksil, who infamously became known as the London Whale for his massive credit trades.