JPMorgan Madoff Lawsuit

The Settlement provides substantial and immediate benefits to the settlement class, providing millions of dollars to injured class members, while avoiding the need for extensive, complex and uncertain litigation against one of the largest banks in the world, represented by highly sophisticated and experienced counsel.

Hagens Berman filed the class-action lawsuit on behalf of two former Bernard L. Madoff investors against JPMorgan Chase claiming the banking giant was complicit in aiding Madoff in orchestrating the Ponzi scheme that robbed investors of more than $65 billion.

The suit was filed in U.S. District Court for the Southern District of New York after a similar suit filed by the trustee appointed to represent Maddoff’s victims was dismissed. The court ruled that the case filed by Irving Picard lacked standing, holding those claims belonged exclusively by the victims of Madoff’s fraud.

Among the allegations leveled in the complaint, investors charge that JPMorgan operated as Bernard L. Madoff Investment Securities LLC’s (BLMIS) primary banker for more than 20 years, and were faced with many indications that the fund was nothing more than a Ponzi scheme.

The complaint details that since 1986, all the money BLMIS collected from unwitting investors passed through JP Morgan in an account known as the 703 Account, where BLMIS co-mingled funds from investors.

The suit contends that JPMorgan should have known that BLMIS’s activities were grossly inconsistent with those of an investment firm through a number of signs of impropriety. Hagens Berman attorneys believe that if JPMorgan had exercised full due diligence, investors could have saved millions of dollars.

According to the complaint, Madoff employees would physically hand-deliver checks drawn on other Madoff accounts into the JPMorgan account and the very next day Madoff’s staff would send out a flurry of wire-transfers equaling the deposit. This sort of behavior should have caused JPMorgan to investigate further, attorneys say.

JPMorgan, for example, was required to review a filing submitted by BLMIS to the SEC known as the Financial and Operational Combined Uniform Single Reports or FOCUS. That report, the suit states, contained glaring irregularities that JPMorgan should have reported to the SEC, including factual omissions and errors, such as failing to report any commission revenue.

Beginning in 2006 JPMorgan sold structured investment products related to BLMIS feeder funds to its clients, profiting on those transactions as well. In the course of structuring those products, JPMorgan performed due-diligence on BLMIS and became suspicious that the BLMIS was a fraud but did not report its findings, the suit alleges, but did redeem $145 million from BLMIS and $276 million from BLMIS feeder funds in 2008.

The suit has been filed on behalf of Stephen and Leyla Hill, investors who incurred losses in BLMIS. It claims JPMorgan had knowing participation in a breach of trust, aided and abetted fraud, aided and abetted a breach of fiduciary duty, aided and abetted conversion and received unjust enrichment. The suit seeks damages for the plaintiffs.

The complaint notes that at least one other banking institution closed BLMIS accounts after the Madoff staff could not supply satisfactory explanation for suspicious account activity.

Investors who incurred losses in BLMIS are encouraged to contact the firm online by filling out the form on this page.