- Investors alleged JPM ignored red flags about Ponzi scheme
- Judge rules investors sued too late and didn’t make a case
An investor suit claiming JPMorgan Chase & Co. ignored red flags about Bernard Madoff’s Ponzi scheme and profited from doing business with the con man was dismissed by a federal judge in New York.
The investors waited too long to sue and failed to show that JPMorgan had any control over Madoff’s actions, U.S. District Judge John Koeltl ruled Wednesday.
Investors filed a series of lawsuits against the JPMorgan after the bank paid $1.7 billion to settle government charges that it failed to take proper steps to stop Madoff’s fraud. The bank also shelled out $350 million for failing to report Madoff’s suspicious activities and more than $500 million to resolve litigation spawned by the scheme.
In the lawsuit thrown out Wednesday, about 2,500 former Madoff customers who withdrew more money from their accounts with Madoff than they invested claimed JPMorgan was “actively complicit” in his conduct and could have put an end to the fraud by ending its banking relationship with him. Such net winners have generally been forced by courts to return fake profits.
"These allegations, at most, support an inference that JPMorgan had constructive, not actual, knowledge of the Madoff Ponzi scheme and that JPMorgan and its employees were negligent, not fraudulent," Koeltl said.
Brian Marchiony, a spokesman for JPMorgan, said the bank was pleased with the decision.
Madoff is serving 150 years in a federal prison in North Carolina after pleading guilty to fraud in 2009.
The case is Friedman v. JPMorgan Chase & Co.,15-cv-5899, U.S. District Court, Southern District of New York (Manhattan).