JPMorgan Chase will pay $1.7 billion to settle allegations that it failed to report evidence of disgraced financier Bernard Madoff's Ponzi scheme to authorities while serving as Madoff's banker.
The settlement money will go toward repaying the thousands of victims who collectively lost more than $17.3 billion as a result of Madoff's scheme, Reuters reports. About $11.9 billion has been recovered to date.
In addition, JPMorgan will pay $350 million to settle a related suit brought by the Office of the Comptroller of the Currency – and $543 million to cover private claims, according to the report, citing court filings.
Meanwhile, Madoff is serving a 150-year federal prison term. The settlements do not include the money Madoff made from investing his victims' funds.
Federal prosecutors said JPMorgan employees internally raised concerns about Madoff's operation in the years leading up to the discovery of his scheme in late 2008, according to the report. By then, the bank had withdrawn most of the money it had in a fund invested with Madoff.
Criminal charges were brought against the bank because JPMorgan never alerted U.S. authorities about the suspicious activity. Had the bank had filed suspicious activity reports with U.S. authorities, as required by law, it could have spared itself from criminal charges and damage to its reputation, not to mention saving Madoff's victims from incurring huge losses.
The settlement brings the cost of JPMorgan's legal woes since the financial crisis to nearly $37 billion. Most of the settlements relate to mortgages issued by the bank and companies it acquired in 2008.
‘We recognize we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time,’ JPMorgan said in a statement.
‘We do not believe that any JPMorgan Chase employee knowingly assisted Madoff's Ponzi scheme,’ the statement said. ‘Madoff's scheme was an unprecedented and widespread fraud that deceived thousands, including us, and caused many people to suffer substantial losses.’
JPMorgan says it is working to improve its internal monitoring and compliance procedures.
As per Reuters, the $543 million to cover private claims includes $218 million to resolve a class-action suit and $325 million to resolve claims by Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities.
Those settlements, however, must still be approved by a judge.
JPMorgan has also agreed to pay an additional $18 million to cover legal fees and expenses in connection with the civil suits, according to the report.