JPMorgan wins dismissal of Madoff investors' lawsuit
(Reuters) — JPMorgan Chase & Co. on Wednesday won dismissal of a lawsuit brought by former customers of Bernard Madoff who blamed the U.S. bank for playing an active role in his Ponzi scheme and ignoring red flags of his fraud.
U.S. District Judge John Koeltl in Manhattan said the plaintiffs failed to show that JPMorgan had specific control over Mr. Madoff's fraud.
He also said the allegations suggested at most that JPMorgan and its employees “were negligent, not fraudulent” in dealing with Mr. Madoff, a major client for two decades prior to his December 2008 arrest.
Judge Koeltl also dismissed several state law claims, saying they were preempted by federal law.
Helen Chaitman, a lawyer representing the plaintiffs, did not immediately respond to a request for comment.
A JPMorgan spokesman said the New York-based bank is pleased with the decision.
The lawsuit was brought on behalf of an estimated 2,500 “net winners” who withdrew more money from their accounts at Bernard L. Madoff Investment Securities L.L.C. than they invested.
They sought to hold JPMorgan liable for failing to end its relationship with Mr. Madoff although it knew or should have known his business was a fraud, and failing to report suspicious activity to the U.S. Securities and Exchange Commission.
Many net winners say Irving Picard, a court-appointed trustee liquidating Mr. Madoff's firm, undervalued their claims and have filed lawsuits to hold other individuals and companies that dealt with Mr. Madoff liable for their alleged losses.
The JPMorgan lawsuit began in March 2014, after the bank agreed to pay $2.6 billion to settle other Madoff litigation, and in a deferred prosecution agreement with the U.S. government acknowledged responsibility for failing to stop Mr. Madoff.
Mr. Madoff, 78, is serving a 150-year prison term.
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