The trustee working on behalf of the victims of Bernie Madoff's huge ponzi scheme has sued JP Morgan for a startling $6.4 billion.
The bank was "thoroughly complicit" in the fraud, says the trustee, Irving Picard, and he cites some emails from JP Morgan executives to prove it.
In one, a JP Morgan risk officer said the following:
For whatever it's worth, I am sitting at lunch with (a bank employee) who just told me 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.
Emails like that, presumably, will force JP Morgan into a painfully large settlement, regardless of the context in which the remarks were made.
So was JP Morgan "complicit" in Madoff's fraud?
JP Morgan says the suit is baseless, and the evidence Picard has published to date does not suggest that JP Morgan knew Madoff was running a Ponzi scheme.
It certainly begs the question, however, whether JP Morgan did enough to satisfy itself that Madoff was NOT running a Ponzi scheme. And that's likely where the legal battle will take place.