While the feeder funds that poured investor money into Bernie Madoff’s scam have received lots of scrutiny, the role of J.P. Morgan Chase is less well known. That might change thanks to data complied by finance professor Linus Wilson showing that the bank generated nearly half a billion dollars in profits from serving Bernie Madoff.
The bank served as Mr. Madoff’s vault starting around 1992, when the Ponzi schemer opened an account in which he deposited clients’ cash. He tapped it periodically to meet investor redemptions. At its peak in 2008, the account had mushroomed to $5.5 billion, according to federal court documents. That translates to $483 million in after-tax profits for the bank for holding the Madoff funds, based on the net interest margin levels reported by J.P. Morgan Chase over the years and other factors, according to research by Linus Wilson, an assistant professor of finance at the University of Louisiana at Lafayette.
“[I] suspect that J.P. Morgan Chase’s shareholders now wish that [Madoff] put his deposits in a competitor’s bank,” Mr. Wilson wrote.
The report could provide useful fodder for the many former Madoff customers seeking a deep set of pockets to help them recoup losses. Howard Kleinhendler, a lawyer representing an investor who has sued J.P. Morgan Chase in federal court in Manhattan, said Mr. Wilson’s analysis “sounds right” and added that the size of the deposits means Mr. Madoff was an important customer and bank executives had to know something was amiss.
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