Madoff Ex-clients File $19B Suit Against JPMorgan

November 8, 2011

Former customers of Bernard Madoff’s massive Ponzi scheme filed a class action lawsuit on Monday seeking to recover $19 billion from JPMorgan Chase & Co , claiming the bank willfully ignored signs of fraud.

JPMorgan was Madoff’s bank for two decades. The lawsuit, filed in federal court in Manhattan, claims the bank was “thoroughly complicit” in concealing Madoff’s fraud.

The lawsuit comes less than a week after a federal judge threw out a similar suit from Irving Picard, the trustee seeking money for Madoff’s victims, ruling that he did not have standing to seek money from the bank. Instead, U.S. District Court Judge Colleen McMahon ruled, only victims of the scheme can pursue such claims, leading to Monday’s lawsuit.

The class action lawsuit asserts that even a cursory examination of the finances of Bernard L. Madoff Investment Securities LLC would have revealed that the money was not used to follow an investment strategy but simply flowed between Madoff and his customers.

“JPMC chose to enable Madoff’s fraud, not just through the various ways it participated in his activity, but by helping to cover Madoff’s naked theft with the imprimatur of a globally recognized financial institution” the lawsuit reads.

Calls to the bank and to a lawyer representing it in the Madoff lawsuits were not immediately returned Monday evening.

In its response to Picard’s lawsuit, the bank argued that he failed to show that anyone at the bank knew of Madoff’s scheme or deliberately worked with him in order to earn more fees.

McMahon’s ruling that Picard had no power to pursue common law claims against JPMorgan and UBS AG followed a similar ruling in July by her colleague, Jed Rakoff, who tossed out $8.6 billion in claims against HSBC Holdings Plc and other defendants.

Picard plans to appeal the ruling, according to a spokeswoman.

He has filed more than 1,000 lawsuits on behalf of former Madoff clients since the firm collapsed in December 2008. Most of those are “clawback” lawsuits against former Madoff customers who Picard believes withdrew too much money from the firm before it failed.

The lawsuits against the banks and “feeder firms” that steered client money to Madoff accused them of turning a blind eye to Madoff’s fraud to secure more fees and commissions.

(Reporting by Joseph Ax; Editing by Gary Hill)

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