Madoff victims’ trustee sues JP Morgan for $6.4B

By Dow Jones Newswires-Wall Street Journal
Posted Dec. 2, 2010 at 2:05 p.m.

The trustee seeking money for victims of Bernard Madoff’s scheme sued JP Morgan Chase & Co. for more than $6 billion on Thursday, claiming the bank enabled his massive fraud.

The lawsuit is the latest salvo by Irving Picard, who has filed a flurry of cases in recent days seeking to claw back improper profits from the fraud. Picard has a deadline of Dec. 11 to bring the lawsuits to recover assets for victims — the two-year anniversary of Madoff’s arrest and the day his firm filed bankruptcy.

Earlier this week, he filed more than 100 lawsuits against so-called “net winners,” persons who withdrew more money than they originally invested with Madoff.

“JP Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” said David J. Sheehan, a lawyer for Picard, in a statement. “While many financial institutions enabled Madoff’s fraud, (JP Morgan Chase) was at the very center of that fraud, and thoroughly complicit in it.”

The complaint, filed in federal bankruptcy court in Manhattan on Thursday, is seeking the return of nearly $1 billion in profits and fees, as well as additional damages of $5.4 billion.

The lawsuit claims JP Morgan had clear suspicions about the legitimacy of Madoff’s operations, but didn’t act on that information, Picard said in a statement. The full complaint was filed under seal with the bankruptcy court.

The case is one of the largest brought by Picard in the Madoff matter. He has sued the estate of Florida businessman Jeffry Picower, claiming Picower withdrew $7.2 billion from the Ponzi scheme. Picard is negotiating with Picower’s estate.

“The complaint filed today by the trustee for the Madoff estate distorts both the facts and the law in an attempt to grab headlines,” JP Morgan said in a statement. “Contrary to the trustee’s allegations, JP Morgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff. As a provider of regular commercial banking services to Madoff’s brokerage firm, JP Morgan complied fully with all applicable laws and regulations governing customer accounts.”

The bank said any suggestion it supported Madoff’s fraud is “utterly baseless and demonstrably false.” JP Morgan also said it has shared significant information with the trustee and addressed his questions since the fraud was revealed.

“JP Morgan intends to defend itself vigorously against the meritless and unfounded claims brought by the trustee,” the bank said.

Madoff, who admitted in March 2009 to carrying out a decades-long, multibillion-dollar Ponzi scheme, is serving a 150-year sentence in a federal prison in North Carolina.

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