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January 7, 2014

JP Morgan Pays $2+ Billion for Crimes Helping Bernie Madoff's Ponzi Scheme

More than five years after Bernard Madoff’s shocking arrest exposed his decades-long Ponzi scheme, the largest in US history costing investors almost $20 billion, the U.S. Attorney for the Southern District of New York charged JP Morgan Chase with criminal violations that enabled Madoff to continue his crimes for so long.  Read the SDNY legal filings, including the statement of facts and settlement papers, here. This article is a good summary of the terms.  

Read our statement on this settlement, which again fails to charge a single individual for any wrongdoing.  This disreputable practice of prosecutors going after banks while letting bankers get away committing all sorts of crimes has to stop.   

At least JP Morgan Chase was required to admit many details of its criminal conduct, including ignoring many warning signs over the years which is what allowed the fraud to continue and for thousands of investors to lose billions of dollars.  These admitted facts reveal many shocking details, although also leave out many important facts that should also be disclosed to the public.

For example, the facts show that JP Morgan withdrew its own investments from Madoff when it could no longer ignore the many red flags in the Fall of 2008.  It protected its profits, but left everyone else to lose all their money. Another shocking fact revealed in the statement of facts is that the information that finally caused JP Morgan to stop ignoring red flag warnings captured in an October 2008 memo were known to JP Morgan for years – how many investors lost how many billions during that time?  And, how much money did JP Morgan make off of Madoff’s business for those years?  The public deserves to know the answers to these questions. 

The settlement also details the many failures of JP Morgan’s compliance departments and personnel regarding Madoff’s Ponzi scheme over the decades, which actually forms the basis for most of the legal action against the bank.  But, this nothing new.  JP Morgan has repeatedly had wide-spread, egregious compliance failures. For example, outrageous internal controls failures were involved at JP Morgan in connection with the so-called London Whale trading losses in 2012, as detailed in the federal charges against two individuals.

Those London Whale trading losses not only cost the bank more than $6 billion dollars and shareholders more than $20 billion in market cap losses, but JP Morgan paid more than $1 billion more to regulators for the legal violations involved.  Thus, this Madoff settlement is just the latest in a long list of investigations into fraud, illegal and criminal conduct at JP Morgan, resulting in JP Morgan paying more than $31 billion in fines and other legal costs since 2009.



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