JP Morgan to pay $1.7bn over Bernie Madoff fraud

 

JPMorgan has agreed a $1.7 billion (approximately £1bn) settlement with US federal authorities for its role in the Bernie Madoff ponzi fraud.

The bank, already beset by other costly legal woes, will pay the sum to settle criminal charges accusing it of ignoring obvious warning signs of Bernard Madoff's massive Ponzi scheme, authorities said. JPMorgan has a 20-year relationship with Madoff before his arrest in 2008.

The $1.7 billion represented the largest ever bank forfeiture and the largest Department of Justice penalty for a Bank Secrecy Act violation.

The settlement includes a so-called deferred prosecution agreement that requires the bank to admit to the charges against it but avoid criminal charges. No individual executives were accused of wrongdoing.

Under the agreement, the criminal charges will be deferred for two years as JPMorgan admits to its conduct, pays the $1.7 billion to victims of Madoff's fraud and reforms its anti-money laundering policies, prosecutors said.

The deal was similar to one reached in late 2012 with HSBC, which agreed to pay $1.9 billion to settle claims it laundered money for Iran, Libya and Mexico's murderous drug cartels.

JPMorgan was Madoff's primary bank in the later years of a multi-decade fraud that ended in 2008 when he revealed to the FBI that his investment advisory business was a Ponzi scheme.

Account statements for thousands of clients showing $60 billion in assets were fiction. Of the roughly $17.5 billion in principal that was real, most of it was gone.

Since then, a court-appointed trustee has recovered more than $9.5 billion to redistribute to burned clients. The trustee sued JPMorgan for $6.4 billion in 2010, accusing the bank of being "willfully blind" and "thoroughly complicit" in the fraud, but an appeals court found in 2012 that he had no legal standing to make the claim.

The JPMorgan settlement is the latest in a series of major deals it has made to resolve its legal troubles. In November, the bank agreed to pay $13 billion over risky mortgage securities it sold before the financial crisis - the largest settlement to date between the Justice Department and a corporation.

JPMorgan still has several lawsuits pending against it related to the high-risk mortgage bonds that soured after the housing market collapsed in 2007.

The bank may be negotiating or litigating over the issue for years and has set aside $23 billion to cover those costs. JPMorgan told regulators in a filing in October that it may need as much as $5.7 billion more.

Madoff, 75, pleaded guilty and is serving a 150-year prison term

Additional reporting agencies

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory