JP Morgan Chase to pay $1.7 bn in penalties for Ponzi scheme

The US prosecutors have secured a whopping $1.7 billion penalty from banking giant J P Morgan, which has been criminally charged for ignoring warning signs of Bernard Madoff's massive Ponzi scheme and will pay the amount to the victims of the Madoff fraud.

 

Manhattan's top federal prosecutor India-born Preet Bharara on Wednesday announced an agreement with JPMorgan, under which the bank agreed to accept responsibility for turning a blind eye to the Ponzi scheme run by Madoff.

 

The Jamie Dimon led-bank agreed to pay a $1.7 billion penalty to the victims of the Madoff fraud through a parallel civil forfeiture complaint; to refrain from future criminal conduct and cooperate fully with the government.

 

The criminal charges are contained in a two-count felony information.

 

Assuming the bank's continued compliance with the agreement, the government has agreed to defer prosecution on the information for a period of two years, after which time the government will seek to dismiss the charges.

 

The bank is facing a slew of government legal actions and the penalties it has to pay to settle these cases now total $20 billion.

 

"Today, the largest financial institution in the country stands charged with two criminal offenses. Institutions, not just individuals, have an obligation to follow the law and to police themselves. They must exercise due care not only with their own money but with other people's money also," Bharara said at a news conference while announcing the settlement.

 

He said JPMorgan "connected the dots" when it mattered to its own profit but was not so diligent otherwise.

 

"The bank has accepted responsibility and agreed to continue reforming its anti-money laundering practices. Most importantly, the victims of Bernie Madoff's epic fraud are $1.7 billion closer to being made whole," he said.

 

The criminal charges against JPMorgan Chase consist of two felony violations of the Bank Secrecy Act, in connection with the bank's relationship with Bernard Madoff Investment Securities.

 

According to the documents filed in Manhattan federal court, JPMorgan and its predecessor institutions had served as the primary bank since 1986 through which Madoff ran his Ponzi scheme.