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Friday, May 17, 2024 | Back issues
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JPMorgan Blamed in $200M Ponzi Scam

SAN FRANCISCO (CN) - A class action claims JPMorgan Chase conspired and aided and abetted a Ponzi scam by letting its operators move and launder nearly $200 million through a Washington Mutual bank in Napa. Morgan Chase bought WaMu after it imploded from bad bets on real estate.

Lead attorney Niall McCarthy said in an interview that Washington Mutual knew about the investment scam. McCarthy said Caribbean-based Millennium Bank offered his three clients bogus "high-yield" certificates of deposit. His client Neerja Gursahaney bought a bum CD allegedly valued at $4 million, McCarthy said.

"Their basic liability is that the management team in Napa branch set up system that allowed the scheme to take place," McCarthy said. He added that he was not sure if anyone outside the Napa branch knew about the scheme.

McCarthy said the Napa branch received millions of dollars in deposits through a remote banking system it had set up, allowing Millennium Bank to transfer ten of millions to offshore bank accounts.

McCarthy said there is no way Washington Mutual could not have known that Millennium Bank was scamming its customers.

"They had to audit the business and do some inquiries to make sure it was legitimate, and obviously the most minimal inquiry would determine the investments were nonexistent," McCarthy said.

According to the federal complaint, the SEC uncovered Millennium's Ponzi scheme in March and froze its assets, preventing the victims from suing Millennium as well.

"For many plaintiffs the loss was devastating, as it was the majority of their life savings," McCarthy said. "They feel that anyone who facilitated the scheme should be held responsible and they are very eager to proceed with the case."

"Right now there is a court order in place that keeps us from suing (Millennium), because basically they're bankrupt," McCarthy said. "If that order is lifted we can add them as defendants."

The class demands damages and restitution for fraud and conversion. McCarthy works with Cotchett, Pitre and McCarthy of Burlingame.

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