A high-level JPMorgan risk officer was warned that Bernie Madoff had “a well-known cloud” over his head and was suspected of running a Ponzi scheme nearly 18 months before he was charged, according to the FT.The lawsuit in which it’s alleged that the executive was forewarned was filed against JPMorgan by Irving Picard, the trustee responsible trying to recover as many funds as possible for Madoff. It has just been unsealed, and was filed secretly at JPMorgan’s request.
The suit aims at recovering $1 billion in fees and profits that JPMorgan earned as the primary banker to Madoff’s firm and by structuring Madoff-related derivatives. Picard also wants more than $5 billion in damages.
Mr Picard alleges that JPMorgan ignored billions of dollars in suspicious transfers in Mr Madoff’s bank business account and repeatedly failed to follow up on concerns raised by employees involved in Madoff structured products.
The suit also says the bank didn’t pay attention to billions of dollars passing through Madoff Securities main JPMorgan account, “much of it by hand-written check, or discrepancies in the account balance and unreported obligations, including a $95 million loan.”
JPMorgan said the allegations are “meritless and is based on distortions of both the relevant facts and the governing law. Contrary to the trustee’s allegations, JPMorgan did not know about or in any way become a party to the fraud.”