A lawsuit recently filed against JPMorgan Chase paints a picture of how JPMorgan “profited in its deals with the weak,” according to a New York Times article by Louise Story called “JPMorgan Accused of Breaking Its Duty to Clients.” In this case, the “weak” are pension funds that lost nearly $500 million that was invested on their behalf by JPMorgan in notes issued by a troubled Structured Investment Vehicle (SIV) called Sigma.
The crux of the allegations is that JPMorgan, knowing Sigma was in trouble, did not tell its Sigma investor clients what it knew about Sigma’s problems, or take any steps to protect their interests, but instead cut a sweet deal for itself by making $8.4 billion in loans to the troubled Sigma secured by $9.3 billion of “high quality” Sigma assets, and subsequently booking nearly $1.9 billion in gains on those assets after Sigma defaulted.
JPMorgan’s position is that “Chinese Walls” required by law prevented the unit that lent Sigma the money and knew about Sigma’s shaky financial situation from sharing that non-public information with the unit that invested its client’s money in Sigma.
The information about Sigma that was not disclosed to investors went as high as Jamie Dimon, JPMorgan’s CEO, according to the article, which describes emails between senior officers of JPMorgan saying things like Sigma’s health was “a race against time,” and that Sigma’s demise presented “very big moneymaking opportunities” for JPMorgan because of Sigma’s high quality collateral.
“The bank’s chief risk officer, John Hogan, wrote back that JPMorgan needed to protect its own position and not worry about what its clients were invested in,” according to the article.
The suit, filed in the Southern District of New York as a class action, “sheds new light on one of Wall Street’s oldest problems ? whether banks treat their clients’ money with the same care that they treat their own,” according to the article.
Page Perry has over 125 years collective experience representing institutional and individual investors in securities-related litigation and arbitration all over the country. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 40 occasions.