Wednesday, 28 January 2015
Last updated 24 min ago
Jan 6 2014 | 2:06pm ET
JPMorgan Chase is poised to pay about $2 billion and to accept a deferred-prosecution agreement over its alleged failure to report suspicions that something was amiss at Bernard Madoff's firm prior to its collapse.
The proposed deal will require the bank to admit wrongdoing in the Madoff matter and will add to the roughly $20 billion JPMorgan has agreed to pay to settle government investigations in the past year.
Federal prosecutors have been investigating JPMorgan's failure to file a suspicious activity report with U.S. regulators just before Madoff's $65 billion Ponzi scheme unraveled. The bank, which was Madoff's primary banker for decades, filed a similar report with British regulators about a month before Madoff's arrest five years ago.
Federal law requires banks to file SARs when they "detect certain known or suspected violations of federal law or suspicious transactions." JPMorgan has denied foreknowledge of Madoff's scam.
Under the deferred-prosecution agreement, prosecutors would agree not to indict the bank in exchange for an acknowledgement of the facts in their case. The deal would be the first-ever such agreement with a major U.S. bank.
Prosecutors had explored forcing JPMorgan to plead guilty to criminal charges, which could have led to the loss of its national bank charter.
More than half of the $2 billion settlement will go to the U.S. Attorney's Office in Manhattan, and the rest to the Office of the Comptroller of the Currency and the Treasury Department. Some of it will be used to pay restitution for Madoff's victims, who lost $17.5 billion in the fraud.
In addition to the U.K. report, prosecutors have amassed a number of e-mails indicating that some at JPMorgan had questions about Madoff's operations. One e-mail just prior to his arrest told of a JPMorgan executive who said that Madoff's "returns are speculated to be part of a Ponzi scheme."
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…