Bernard Madoff trustee sues JP Morgan for $6.4bn
• JP Morgan was primary banker to Bernard L Madoff Investment Securities
• Lawyers claim bank thought returns were ‘too good to be believable’
The trustee charged with recovering billions lost by victims of disgraced financier Bernard Madoff yesterday sued JP Morgan for $ 6.4bn (£4.1bn) claiming the bank played a central role in his fraud.
A lawsuit filed in New York by Irving Picard alleges the bank ignored well-documented suspicions about Madoff and continued to collect fees and profits.
Picard, who took the action in the US bankruptcy court, is seeking to recover at least $ 1bn in fees and profits and $ 5.4bn in damages to be distributed to Madoff’s victims.
“JP Morgan was wilfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” said David Sheehan of Baker & Hostetler, legal counsel for the trustee.
He said that while many financial institutions enabled Madoff to carry out his fraud, JP Morgan was “at the very centre of that fraud, and thoroughly complicit in it”. It was primary banker to Bernard L Madoff Investment Securities (BLMIS) for more than 20 years, and was responsible for knowing the business of its customers, he said.
“Madoff would not have been able to commit this massive Ponzi scheme without this bank. JP Morgan should pay the price for its central role in enabling Madoff’s fraud.”
According to the complaint, JP Morgan had clear and documented suspicions about the legitimacy of BLMIS’s operations. “JP Morgan admitted in the months before Madoff’s arrest that BLMIS’s returns were too good – especially in down markets – to be believable, but for years they pretended that was not the case,” said Deborah Renner, a partner at Baker & Hostetler.
“Just as in the children’s fable, they knew the ‘emperor had no clothes,’ but looked the other way, allowing the fraud to continue.”
JP Morgan strongly denied all the allegations. In a statement the bank said the suit “distorted the facts” and it would defend itself “vigorously” against the charges.
Victims lost billions when Madoff’s business empire was exposed as a giant fraud in December 2008. He is serving 150 years in prison.
Loading ...