JPMorgan Pays $2.7 Billion To Settle Madoff Allegations

Jan 8 2014 | 1:32pm ET

JPMorgan Chase has settled allegations that it failed to alert U.S. regulators to concerns about Bernard Madoff prior to the collapse of his Ponzi scheme five years ago, agreeing to pay some $2.7 billion.

The firm, which served as Madoff's primary bank for decades, will pay $1.7 billion to settle criminal charges over its failure to file a suspicious activity report about Madoff just prior to his arrest. The bank filed a similar report with British regulators about a month before Madoff's $65 billion scam unraveled.

JPMorgan also accepted a deferred-prosecution agreement, admitting wrongdoing in the case. The deal means the firm will not be prosecuted if the firm improves its money-laundering controls.

JPMorgan is the first-ever U.S. bank to accept a deferred-prosecution accord, which will see an indictment against it suspended for two years. Had the bank been indicted or forced to plead guilty, it could have lost its national bank charter.

In addition to the $1.7 billion prosecution deal, JPMorgan will pay a further $543 million to the trustee recovering money for Madoff's victims and $350 million to the Office of the Comptroller of the Currency. Most of the money collected is expected to be returned to Madoff clients, who lost about $17.5 billion in the fraud.

Manhattan U.S. Attorney Preet Bharara said yesterday that JPMorgan "repeatedly" ignored red flags about Madoff's operation, enabling him "to launder billions of dollars in Ponzi proceeds." Federal Bureau of Investigation Agent George Venizelos rapped the bank for its failure to "carry out its legal obligation while Bernard Madoff built his massive house of cards."

"The bank connected the dots when it mattered to its own profits, but was not so diligent otherwise," Bharara said.

The settlements add to the roughly $20 billion the bank has agreed to pay out in deals with the government over the past 12 months. JPMorgan said yesterday that it "could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time."

No executives or employees of the bank were charged in the case, and JPMorgan spokesman Joseph Evangelisti said yesterday that the bank "does not believe that any JPMorgan Chase employee knowingly assisted Madoff's Ponzi scheme."


In Depth

Fundraising for Mid-Sized PE Funds: Should You Use a Registered B/D?

Dec 6 2016 | 7:18pm ET

When does a fund sponsor need to use a registered broker/dealer when raising capital...

Lifestyle

Trump Attends 'Villains and Heroes' Costume Party Dressed As...Himself

Dec 5 2016 | 11:16pm ET

U.S. President-elect Donald Trump attended a "Villains and Heroes" costume party...

Guest Contributor

A Hard Look At Your ‘Soft’ Hedge Fund Marketing Information

Dec 8 2016 | 9:03pm ET

Conventional wisdom holds that due diligence examines quantitative as well as qualitative...

 

From the current issue of

Since the inception of Modern Trader, a core editorial theme has centered on the wisdom and power of crowds. Editorial emphasis has focused on companies and projects engaged in the collection and analysis of information. 

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR