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Monday, July 22, 2024 | Back issues
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USA Hits Madoff Jackpot;|JPMorgan Chase Loses

MANHATTAN (CN) - JPMorgan Chase Bank will cough up $1.7 billion in cash, the product of Bernard Madoff's Ponzi scheme, under a deferred prosecution agreement with the United States.

From 1986 until Madoff was arrested on Dec. 11, 2008, virtually all the money in his giant Ponzi scheme flower through accounts at JPMorgan Chase, Uncle Sam says in the federal in rem complaint against $1.7 billion cash dollars.

Madoff was sentenced to 150 years in federal prison. When his Ponzi scheme collapsed, Madoff Securities had more than 4,000 client accounts and claimed to have a combine balance of $65 billion, though only $300 million actually remained, the United States says in the lawsuit.

"On or about January 6, 2014, JPMC [JPMorgan Chase] entered into a deferred prosecution Agreement with the United States," the complaint states. "Pursuant to that agreement, JPMC agreed to forfeit to the United States $1,700,000,000, i.e., the defendant funds. The defendant funds represent proceeds of Madoff's fraud, and constitute some of the billions of dollars that flowed through the Madoff Securities accounts at JPMC during the course of the Ponzi scheme, including from the

point in October 2008 that JPMC reported to regulators in the United Kingdom that JPMC had suspicions about the legitimacy of Madoff Securities.

"Specifically, on or about October 29, 2008, JPMC filed a report with the United Kingdom Serious Organised Crime Agency ('SOCA') pursuant to the U.K. Proceeds

of Crime Act. In that report, which identified Madoff Securities as its 'Main Subject - Suspect,' JPMC reported that, among other things, 'the investment performance achieved by [the Madoff Securities] funds ... is so consistently and significantly ahead of its peers year-on-year, even in the prevailing market conditions, as to appear too good to be true - meaning that it probably is.' JPMC reported that, '[a]s a result,' it had submitted redemption requests for more than $300 million of its own funds, which were invested in Madoff Securities 'feeder' funds.

"Between the date of JPMC's report to SOCA and the date of Madoff's arrest, the balance of the Madoff Securities accounts at JPMC fell from approximately $3 billion,

to approximately $234 million as a result of withdrawals paid to Madoff's investors as fictitious redemptions. The $1.7 billion that JPMC has agreed to forfeit to the United States pursuant to the deferred prosecution agreement represents a portion of the funds leaving the Madoff Securities accounts at JPMC from October 29, 2008 (i.e., the date of JPMC's report to SOCA) until Madoff's arrest on December 11, 2008, and is in an amount substantially greater than the value of all the funds redeemed by JPMC from the Madoff-linked feeder funds.

"The deferred prosecution agreement and accompanying statement of facts are attached as Exhibit 1, and are incorporated fully into this complaint as if they had been set forth herein."

Madoff ran his Ponzi scam for 30 years.

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