Describing JP Morgan Chase as an “active enabler” that “knew” about the fraud being perpetrated by Bernard Madoff, the Madoff bankruptcy trustee has amended his complaint against JPMorgan Chase to increase the amount of compensatory damages claimed from $5.4 billion to $19 billion, an amount that is based on the trustee’s latest estimate of principal lost by all Madoff investors by the time the Ponzi scheme collapsed in December 2008, according to Linda Sandler’s Bloomberg article entitled against JP Morgan to “JPMorgan Hit With $19 Billion Damages Claim by Madoff Trustee.” The suit to recover assets to be distributed to defrauded Madoff investors alleges that JP Morgan had “actual knowledge” of the Madoff ponzi scheme but failed to take any action to stop the fraud.
JPMorgan “was an active enabler of the Madoff Ponzi scheme,” Picard’s lawyer, David Sheehan, was quoted as saying, adding: JPMorgan “not only should have known that a fraud was being perpetrated, they did know.”
The Madoff trustee, Irving Picard, has filed 1,000 suits claiming $90 billion for Madoff investors. He alleges that billions of dollars flowed from Madoff’s account at the bank to investors, and that the bank knew it “could not be linked to a legitimate business purpose’.”
Picard also alleges that JPMorgan knew that a 2005 report in which Madoff only reported $72.2 million in securities was wrong, because it had made a loan to Madoff that was collateralized by $100 million in securities.
JPMorgan bankers “could see that money customers deposited into BLMIS’s main account was not used to buy or sell securities,” Deborah Renner, another of Picard’s lawyers, referring to Bernard L. Madoff Investment Securities LLC, was quoted as saying, adding: “They could see that it was merely transferred to other customers, in patterns serving no legitimate business purpose. They could see that Madoff’s regulatory filings were materially inconsistent with [the Madoff firm’s] actual finances. Yet, as alleged, they allowed the fraud to continue.”
JPMorgan denies the allegations and states that it complied fully with all laws and regulations governing bank accounts.
The case is Picard v. JPMorgan Chase & Co., 1:11-cv-00913, U.S. District Court, Southern District of New York (Manhattan).
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