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Ponzi Scheme Collusion

Picard v. JPMorgan Chase & Co et al. Adv. Pro. 10-04932 (Bkr. SDNY) Manhattan

Summary:

Irving Picard, the bankruptcy trustee for the estate of convicted multi-billion-dollar Ponzi schemer Bernard Madoff, alleges that JP Morgan played a “significant role in aiding and abetting” the fraud. “While numerous financial institutions enabled Madoff's fraud, JP Morgan was at the very center of the fraud and thoroughly complicit in it.” The complaint cites internal JP Morgan emails, e.g.: “For whatever it[’]s worth, I am sitting at lunch with [JPMC Employee 1] who just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a [P]onzi scheme.” Picard also alleges that JP Morgan advised the UK Serious Organised Crime Agency in October 2008 – two months before Madoff was arrested - about concerns Madoff’s returns were “too good to be true” ; however Picard alleges that JPM had multiple red flags and concerns Madoff was running a Ponzi scheme some 18 months before it finally collapsed, and that the statement to SOCA was mainly to attempt to protect JPM. The action seeks $1 million in fees and $5.4 billion in damages.

Status:

As of 9 February 2011 JP Morgan has moved to withdraw the bankruptcy reference (i.e. to have the case moved from bankruptcy court to federal district court, where it can be heard before a jury).

On 30 March 2011 bankruptcy trustee Picard filed a brief opposing JPMorgan's motion to move the case to district court, asserting that "JPMC seeks refuge in this court to escape the scrutiny of the bankruptcy court overseeing the vast and complex proceedings surrounding the BLMIS Ponzi scheme....Yet there is no escaping the fact that JPMC was at the very center of Madoff's Ponzi scheme."


Oral argument is set for 29 April 2011.

See also the related action, Securities Investor Protection Corporation v. Benard L. Madoff Investment Securities, 08-01789 (S.D.N.Y.)

News:

  1. http://www.bloomberg.com/news/2011-03-31/madoff-trustee-picard-says-jpmorgan-shouldn-t-escape-bankruptcy-court.html
  2. http://www.execdigital.com/business/leader/bernie-madoff-banks-had-know-fraud
  3. http://www.bloomberg.com/news/2011-02-03/jpmorgan-suspected-bernard-madoff-s-fraud-trustee-picard-says-in-lawsuit.html
  4. http://www.guardian.co.uk/business/2011/feb/03/bernard-madoff-jp-morgan-uk-authorities-before-confession
  5. http://online.wsj.com/article/SB124604151653862301.html
  6. http://www.bloomberg.com/news/2011-02-09/jpmorgan-chase-asks-judge-to-move-madoff-case-from-u-s-bankruptcy-court.html

Documents:

  1. http://jpmorgan-watch.com/files/42_trustee_brief_in_opposition_to_jpmorgan_motion_to_withdraw_reference.pdf
  2. http://jpmorgan-watch.com/files/41_jpmorgan_brief_in_support_of_motion_to_withdraw_reference.pdf
  3. http://documents.nytimes.com/madoff-trustees-lawsuit-against-jpmorgan-chase