In seeking the dismissal of charges against Javier Martin-Artajo and Julien Grout, the Department of Justice said it "no longer believes that it can rely on the testimony" of Bruno Iksil, a cooperating witness who had been dubbed the London Whale, based on recent statements he made that hurt the case.

Prosecutors also said efforts to extradite Martin-Artajo and Grout, respectively citizens of Spain and France, to face the charges have been "unsuccessful or deemed futile."

Acting U.S. Attorney Joon Kim in Manhattan asked a federal judge for permission to drop charges that included securities fraud, wire fraud and falsifying records. Martin-Artajo and Grout were indicted in September 2013.

"After four long years of protracted litigation, we are very pleased that the government has decided to do the right thing, and dismiss the criminal case," Grout's lawyer, Edward Little, said.

Lawyers for Martin-Artajo did not immediately respond to requests for comment.

The dismissal request marks a fresh setback in U.S. efforts to prosecute individuals for financial crimes.

This has included the undoing of several insider trading convictions and pleas that had been won by Kim's predecessor Preet Bharara.

It has also included this week's overturning of the convictions of two former Rabobank NA [RABO.UL] traders for rigging the Libor interest rate benchmark.

Martin-Artajo and Grout were accused of hiding hundreds of millions of dollars of losses within JPMorgan's chief investment office (CIO) in London by marking positions in a credit derivatives portfolio at inflated prices.

These losses were part of the $6.2 billion loss centred on Iksil, who Martin-Artajo supervised and Grout worked for.

The scandal briefly hurt the reputation of JPMorgan Chief Executive Jamie Dimon, who initially called it a "tempest in a teapot."

JPMorgan ultimately paid more than $1 billion and admitted wrongdoing to settle related U.S. and British probes. Ina Drew, who led the CIO, retired soon after the losses surfaced.

Iksil has chafed at the London Whale moniker and being portrayed as solely at fault for the losses.

In a February 2016 letter released to the media, Iksil, a French national, said he had been "instructed repeatedly" by senior management in the CIO to execute the trading strategy that caused the losses.

Martin-Artajo and Grout still face U.S. Securities and Exchange Commission civil charges.

Iksil's lawyer and JPMorgan did not immediately respond to requests for comment.

The cases are U.S. v. Martin-Artajo et al, U.S. District Court, Southern District of New York, No. 13-cr-00707; and SEC v Martin-Artajo et al in the same court, No. 13-05677.

(Reporting by Jonathan Stempel; Editing by Sandra Maler and Leslie Adler)

By Jonathan Stempel