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Madoff Trustee Finds JPM Was Complicit In Ponzi Fraud

Tyler Durden's picture


For all those who were wondering why someone just bought a massive 75,000 put spread block on JPM earlier, here's the reason. Just out from the NYT, disclosing a suit filed previously against JPM by Madoff trustee Irving Picard under seal: "Senior executives at JPMorgan Chase expressed serious doubts about the legitimacy of Bernard L. Madoff’s investment business more than 18 months before his Ponzi scheme collapsed but continued to do business with him, according to internal bank documents made public in a lawsuit unsealed on Thursday. The lawsuit against the bank was filed under seal on Dec. 2 by Irving H. Picard, the bankruptcy trustee gathering assets for Mr. Madoff’s victims. At that time, David J. Sheehan, the trustee’s lawyer, bluntly asserted that Mr. Madoff “would not have been able to commit this massive Ponzi scheme without this bank.” But with the case under seal, there was no way to gauge the documentation on which the trustee based his $6.4 billion in claims against the bank — until now."

So what happens when the biggest ponzi scheme ever, that of the US economy, better known as the Russell 2000 by the Chairsatan, finally collapses. Will the entire world be guilty of complacency in that particular unprecedented pyramid scheme? Will every person who bought shares in stocks starting with March 2009 be forced to refund their earnings to a suddenly far, far angrier taxpayer base? Will Bernanke still be allowed to use the excuse that stocks went up as a result of QE2-100... but not commodities, and that any non-USD denominated food price surges are not to be blamed on the goblin in chief?

More on the latest fraud committed by JP Morgan from the FT:

A senior JPMorgan Chase risk officer was warned that Bernard Madoff had “a well-known cloud” over his head and was suspected of running a Ponzi scheme nearly 18 months before the New York broker was charged with presiding over a $19.6bn fraud, according to a newly unsealed court filing.

The allegation is part of a $6.4bn lawsuit filed against the US bank by Irving Picard, the trustee charged with recovering money for Mr Madoff’s victims. The lawsuit seeks to recover $1bn in fees and profits that JPMorgan reaped as the primary banker to Mr Madoff’s business and by structuring Madoff-related derivatives, plus $5.4bn in damages.

The 114-page complaint unsealed Thursday was originally filed secretly at JPMorgan’s request. It was one of nearly 60 lawsuits the trustee filed late last year seeking more than $40bn from dozens of banks, hedge funds and individuals he claims profited from Mr Madoff’s fraud.

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.

JPMorgan was Madoff’s primary US bank for more than 20 years and it also sold structured products related to the hedge funds that sent money to the scheme. As part of the latter process, the bank did due diligence on the hedge funds and their relationship with Mr Madoff. Mr Picard’s complaint quotes from several emails in which JPMorgan employees raised questions.

“It doesn’t look pretty,” wrote one about the Aurelia hedge fund’s arrangements, and another alllegedly complained “Mr. Madoff will not allow us to conduct any due diligence on him.”

The conversation with the risk officer allegedly occurred in June 2007 when JPMorgan was considering backing more Madoff-related structured products.

The complaint quotes an email in which the risk officer allegedly wrote that he had been told by another JPM employee “that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a [P]onzi scheme-he said if we google the guy we can see the articles for ourselves....I think we owe it to ourselves to investigate further.”

Of course, to anyone who rightfully claims that JPM was fully complicit in the fraud, Jamie Dimon can simply counter that they are idiots, that matters here are far more complex than mere mortals can ever graps, and that if this investigations does indeed progress further, then the world as we know it may end, should the true depth of Wall Street's criminality be exposed. Which is why we see lots and lots of smooth status quo sailing ahead.


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Thu, 02/03/2011 - 15:43 | Link to Comment Oh regional Indian
Oh regional Indian's picture

They say that doing time in prison hardens anyone. Makes career criminals of petty ones.

Perhaps Wall Street is just such a prison, with golden handcuffs, so hard to remove, even though the key is in your pocket.

A den of thieves. Now getting at each other's throats. Classic!

Was that Madoff who got bonked around in prison? Or was that the southcoast Stanford


Thu, 02/03/2011 - 16:31 | Link to Comment Miss America
Miss America's picture

C'mon folks...  When do we see the Bear Stearns dots connected????

Thu, 02/03/2011 - 16:58 | Link to Comment iDealMeat
iDealMeat's picture

Good post M.A.




Thu, 02/03/2011 - 18:26 | Link to Comment Careless Whisper
Careless Whisper's picture

criminals indeed. what i heard elsewhere, but did not see in the above posting, is that mister picard found that jp morgan chase chemical banking bankone bear stearns wamu was guilty of aiding and abetting. are you people starting to get it ???


Aiding and abetting applies to someone who assists or helps one or more other people commit a crime. To be held accountable as an aider and abettor, you must know of the criminal objective and do something to make it succeed.

jp morgan a.k.a. madoff's aider and abettor.

Thu, 02/03/2011 - 15:41 | Link to Comment BrianOFlanagan
BrianOFlanagan's picture

is there any fraud JPM isn't involved in?

Thu, 02/03/2011 - 15:53 | Link to Comment njdoo7
njdoo7's picture

Yet we have not seen ONE of them go to jail.  Good thing the justice department has resources to educate the public about the dangers of freedom of speech, as well as finding legal loopholes for prosecution of foreign journalists freely reporting information.

Thu, 02/03/2011 - 19:01 | Link to Comment eatthebanksters
eatthebanksters's picture

Eric Holder is a joke....

Thu, 02/03/2011 - 15:53 | Link to Comment EscapeKey
EscapeKey's picture

They are a market leader and innovator in systemic fraud.

Thu, 02/03/2011 - 17:29 | Link to Comment Thomas
Thomas's picture

We had a chance to get them with Enron and passed. One of these days, some serious lynching will occur.

Thu, 02/03/2011 - 15:42 | Link to Comment bankrupt JPM bu...
bankrupt JPM buy silver's picture

Perfect, lets buy some silver, think about Bernnie in the slammer, and rejoice for the end game soon coming to a theater near you.


Thu, 02/03/2011 - 15:43 | Link to Comment hugovanderbubble
hugovanderbubble's picture

 I have a Myth with JPM as one of  the best banks in the world...unfortunately this perception has changed.

 What a deception.

Thu, 02/03/2011 - 15:47 | Link to Comment Sam Clemons
Sam Clemons's picture

Of course they were complicit.  They practice fractional reserve banking, which is one of the biggest Ponzi schemes going.

Thu, 02/03/2011 - 16:53 | Link to Comment Zero Govt
Zero Govt's picture

+ 30/1

Thu, 02/03/2011 - 15:45 | Link to Comment Sutton
Sutton's picture

No order flow. No commissions. No clearing issues.

Thu, 02/03/2011 - 15:47 | Link to Comment John McCloy
John McCloy's picture

JPM took the hit now rallying green on the expectations that political captures will protect them..just remarkable.

Thu, 02/03/2011 - 18:41 | Link to Comment Bay of Pigs
Bay of Pigs's picture

I don't know how anyone could work at, or bank with, this outfit. Apparently people are just too dumb or they have no conscience. Maybe both.

One thing is certain, JPM is totally and completely corrupted to the core.

Burn it to the ground.


Thu, 02/03/2011 - 19:03 | Link to Comment eatthebanksters
eatthebanksters's picture

The culture (of corruption) of any company starts withh its leadership and flows downward,,,

Thu, 02/03/2011 - 15:47 | Link to Comment Clark_Griswold ...
Clark_Griswold Hedge Mnger's picture

and naturally someone gets wiff of it to move 75K puts just moments before the annoucement.... but theres nothing wrong on that one.

I'd like to place a few puts on JPM just before the SH#t hits the fan; would someone be so kind as to give me a heads up about a minute before the annoucemnt.

Thank You

Thu, 02/03/2011 - 15:49 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Consider it done clarke. No trouble, at all.

Can you put puts or do they have to be placed?

Just curious.



Thu, 02/03/2011 - 15:55 | Link to Comment EscapeKey
EscapeKey's picture

You are very confused.

When it's an outsider, it's "insider trading".

When it's an insider, it's "insider, trading".

Thu, 02/03/2011 - 16:10 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Now that, is funny!


Thu, 02/03/2011 - 15:49 | Link to Comment Misean
Misean's picture

Sacre Bleu! Is there no honor among thieves?!?

Thu, 02/03/2011 - 15:49 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Sorry, but anyone "in da bidness" with a working brain who looked at the numbers knew Madoff was a con. There is no plausible deniability here except if granted politically.

Cue the Congress to grant special dispensations for the proper campaign donations.

Thu, 02/03/2011 - 15:58 | Link to Comment bob_dabolina
bob_dabolina's picture

No shit they knew. Their redemption caused the thing to collapse.

Yea...infinity returns to infinity. No losses ever never ever never. Come on.

Poor Kevin Bacon.

Thu, 02/03/2011 - 17:11 | Link to Comment iDealMeat
Thu, 02/03/2011 - 15:50 | Link to Comment Cheyenne
Cheyenne's picture

Taking a poke at JPM in Chicago...


Thu, 02/03/2011 - 17:41 | Link to Comment Fred Hayek
Fred Hayek's picture

It's a small thing and Chicago politicians are hardly the people whose ethical scorn you'd fear.  But it shows that the negative perception of bankster Legs Dimon gallops forward.

Thu, 02/03/2011 - 15:53 | Link to Comment Boilermaker
Boilermaker's picture

They'll get out of it without even a mark.

These guys are above the law and we know, they know it, and everyone else knows it.

Thu, 02/03/2011 - 16:03 | Link to Comment Just Observing
Just Observing's picture

As becomes more and more apparent each day....

Thu, 02/03/2011 - 15:53 | Link to Comment janchup
janchup's picture

Want a good sad laugh? Forward this to DOJ so they can ignore it.

Thu, 02/03/2011 - 15:55 | Link to Comment AccreditedEYE
AccreditedEYE's picture

And only in this corrupt, robot-owned market that we live in would the stock NOT be getting blow torched... off a measly .17 cents. WTF?!

Thu, 02/03/2011 - 16:56 | Link to Comment Zero Govt
Zero Govt's picture

frauds great for bottom line, more surprised JPM's not up 3% !!!

Thu, 02/03/2011 - 16:18 | Link to Comment Pegasus Muse
Pegasus Muse's picture

Reader Poll on Dealbreaker. 

When will CNBC cover this breaking story?

a.  Never …. Jaime Dimon owns us

b.  Right after Ms B Cups returns to Cairo

c.  As soon as we re-hire Ratigan and Gasparino

d.  Friday night, appended to the 237th airing of the CNBC Documentary Wall St Banksters gone Wild  

Thu, 02/03/2011 - 15:59 | Link to Comment Pure Evil
Pure Evil's picture

So who had inside information to know when to place a 75,000 put order block on JPM.

How come I'm not in on the juice?

Thu, 02/03/2011 - 18:35 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

JPM put in the order for their own account.

I mean, it's an opportunity, right?

Thu, 02/03/2011 - 16:01 | Link to Comment Prof Gulliver
Prof Gulliver's picture

And as the news is revealed, JPM climbs and the market suddenly surges higher. You can't make this stuff up!

Thu, 02/03/2011 - 16:11 | Link to Comment Pure Evil
Pure Evil's picture

Didn't ya know, in the Land of the Bernank, crime does pay.

Thu, 02/03/2011 - 16:14 | Link to Comment John McCloy
John McCloy's picture

   Everytime I think I could not possibly muster up any more anger at the corruption rampant in our country I amaze myself..More importantly however Holder did find time to stage a nice PR bust of 100 mafia last month. Meanwhile these pinstripe Corleones steal billions and payoff the politicians to make it legal.

Thu, 02/03/2011 - 16:17 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

word. yup "thar she blows"....standard end-of-day goosing. Thar she BLOWS, alright - the Bitch

Thu, 02/03/2011 - 16:02 | Link to Comment resipsaloquacious
resipsaloquacious's picture

Oh, I see.  So, the SEC, the countries primary market watch-dog, is permitted to ignore the case that was presented on a silver platter by Markoplus et. al., while mastrubating furiously to  Yet JPMChase had a what... fiduciary responsibility to inform ... who exactly... that Madoff might be committing fraud?   And by doing so worry about creating a business defamation case. 

A similar argument was made by a former Madoff client -- not the trustee -- who deposted money into Madoff's JPMChase account, I believe it was dimissed for failure to state a claim, but it might have been settled. 

Thu, 02/03/2011 - 16:02 | Link to Comment haskelslocal
haskelslocal's picture

Interesting that when we agree with the ability to skate on such atrocities, we become compliant with their wishes. As hard as it is to fight, best to not agree that "they'll just get away with it". That's what they want you to think... (As true as it might be...)

DOJ? Do you have any fight left? Or did you go down with the count?

Thu, 02/03/2011 - 16:09 | Link to Comment resipsaloquacious
resipsaloquacious's picture

By the way, Picard, the trustee, did not "find" anything; he alleged.

Unlike the much more esteemed Picard, he cannot just "make it so."

Thu, 02/03/2011 - 16:10 | Link to Comment downrodeo
downrodeo's picture

We should all just leave JPM alone already! They've suffered enough!


/sarc, of course/


"it’s not fair to lump all banks together...I just think this constant refrain [of] ‘bankers, bankers, bankers,’ - it’s just a really unproductive and unfair way of treating people…People should just stop doing that.”-Jamie Dimon


Thu, 02/03/2011 - 16:13 | Link to Comment Pure Evil
Pure Evil's picture

Ya know, it would have sounded better if he had said, "banksta, banksta, banksta".

Thu, 02/03/2011 - 16:42 | Link to Comment downrodeo
downrodeo's picture

That term is probably so offensive to his psyche that he is incapable of even uttering it.

Thu, 02/03/2011 - 17:05 | Link to Comment Zero Govt
Zero Govt's picture

Jamie and the Wall Street banks wrote the book on being "unproductive" so you can't argue with his expertise on that score.... take a pigs ear, get a CRA to rate it a silk purse, accumulate others wealth, short the pigs ear, donate cut to GOP/DEMS, no problems

Fri, 02/04/2011 - 06:27 | Link to Comment Antipodeus
Antipodeus's picture

Jamie's right, you know everyone!  It is SO unfair & unproductive.  So in future the refrain should be: "Bankers? Banksters! Wankers? DIMON!!" (repeat)



Thu, 02/03/2011 - 16:11 | Link to Comment TooBearish
TooBearish's picture

Too bad what a waste of premium - Star banker Jamie the D will settle for nomial amount out of court, its just the cost of doing move along! Buy em!

Thu, 02/03/2011 - 16:14 | Link to Comment satansanus
satansanus's picture

jamie dimon is knee deep in madeoff, nasdaq collapse, 2008 collapse...

Thu, 02/03/2011 - 16:14 | Link to Comment satansanus
satansanus's picture

and he is guilty of about a million differrent crimes

Fri, 02/04/2011 - 05:08 | Link to Comment phil silver
phil silver's picture

Where's the justice?

Where's the honesty?

Most importantly, where's the action?

My hope in mankind has been severely dented

Just who can you trust!!!!!!

Thu, 02/03/2011 - 16:19 | Link to Comment tellsometruth
tellsometruth's picture

Nothing to see here public don't you remeber it is Superbowl Sunday?





Thu, 02/03/2011 - 16:22 | Link to Comment tellsometruth
tellsometruth's picture

Ben likes Steelers except he thinks they spell it Stealers...

Thu, 02/03/2011 - 16:30 | Link to Comment Quinvarius
Quinvarius's picture

JPM stinks like a sewer.  One of the biggest banks on Wall Street walking around like it didn't take a single hit during the collapse of the banking system?  I don't even see any of the horrible commodity trades they make getting booked as losses.  These are trades that dwarf Nick Leeson's Barons trades and the LTCM screw up.  If they can't admit the obvious, they are stuck in permanent lie mode.  They are stuck on hiding everything.  Some day we will wake up and JPM will be at zero with no forewarning.  You can't short it.  But owning it is insane.

Thu, 02/03/2011 - 16:40 | Link to Comment EscapeKey
EscapeKey's picture

JPM=FRB. JPM won't fall, until FRB does.

Thu, 02/03/2011 - 16:39 | Link to Comment Bastiat
Bastiat's picture

Now there is a "terrorist threat" against Wall St so now the full force of Homeland Security can protect the racketeering filth.  I understand Osama has been seen lurching down Wall St zombie-like.

Thu, 02/03/2011 - 17:01 | Link to Comment nevadan
nevadan's picture

The 114-page complaint unsealed Thursday was originally filed secretly at JPMorgan’s request.

WTF?  Is this s.o.p?  JPMorgand asks for secrecey and automatically gets it?

Thu, 02/03/2011 - 18:37 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Well, yes. 

Any questions about who is running the show go to www.weref**

Thu, 02/03/2011 - 17:42 | Link to Comment Temporalist
Temporalist's picture

JP Morgan has supplanted Madoff as the biggest name in ponzi next to Ponzi.  For anyone to continue to give money to them, hold money with them, deal with them, are supporting fraud.

Fri, 02/04/2011 - 05:11 | Link to Comment suckerfishzilla
suckerfishzilla's picture

JP Morgan may never crash on the NYSE however I think they are prime candidates for a Silver lobotomy.

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