Bernard Madoff, the Mafia, and Naked Short Selling

[Jan Klimkowski]

JP Morgan too:

JPMorgan Sued for $6.4 Billion Over Madoff Fraud by Liquidating Trustee

The trustee liquidating Bernard Madoff’s former investment firm sued JPMorgan Chase & Co. for $6.4 billion over claims the bank aided and abetted the imprisoned con man’s fraud.

Irving H. Picard, the lawyer appointed as trustee by a New York bankruptcy court, said in a statement that he sued JPMorgan yesterday seeking $1 billion in fees and $5.4 billion in damages.

“JPMorgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” David J. Sheehan, counsel to Picard, said in the statement. “JPMC was at the very center of that fraud, and thoroughly complicit in it.”

Any money recovered from JPMorgan will be returned to Madoff’s victims on a pro rata basis, said Picard, who has so far recovered about $1.5 billion for Madoff creditors.

Picard’s complaint “blatantly distorts both the facts and the law in an attempt to grab headlines,” JPMorgan, the second- biggest U.S. bank, said yesterday in a statement. “JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff.”

JPMorgan, based in New York, said it has assisted Picard in his investigation of Madoff’s firm and called his claims “irresponsible and over-reaching.”

‘XYZ Corp.’

Picard filed a separate complaint yesterday seeking $3.14 million from an unidentified company. The complaint, against “XYZ Corp.,” was filed under seal in U.S. Bankruptcy Court in Manhattan. The docket entry for the lawsuit listed the demand as “$3135671000,” or $3.14 billion. In an e-mail today, Picard provided the amount of the demand and said that the court record was being corrected.

The lawsuit against JPMorgan, which Picard called Madoff’s “primary banker,” was filed under seal in the same court, according to the trustee’s statement.

JPMorgan “has designated virtually all of their information as confidential,” Picard said. “We intend to move to have the complaint made public as soon as possible.”

The suit is the second-biggest filed by Picard in the Madoff bankruptcy, after a $7.2 billion claim he filed against investor Jeffry Picower in May 2009. Picower died in October 2009.

$15.5 Billion

In addition to the Picower suit, Picard filed at least 18 other court claims seeking the return of $15.5 billion paid to Madoff friends and family, feeder funds, favored investors and others.

On Nov. 23, Picard sued UBS AG for at least $2 billion, claiming the Swiss wealth-management firm also helped Madoff in his fraud. UBS said it bears no responsibility for Madoff’s crimes. Three days later, Picard sued 40 people who were former Madoff employees or are relatives of Madoff or his wife, Ruth Madoff.

Over the past week, Picard has sued hundreds of so-called “net winners,” investors who withdrew more from their Madoff accounts than they invested. Picard, supported by a ruling in the case from U.S. Bankruptcy Judge Burton Lifland, claims such fictitious profits must be returned to the bankruptcy estate and paid out to all of Madoff’s victims with valid claims. Yesterday, he sued entities of Paris-based BNP Paribas to recover the $160 million they allegedly got from Madoff’s fraud.

Picard is suing for the return of fictitious profits earned in the last six years.

Dec. 11 Deadline

Today, Picard filed a complaint for $182.4 million against Trotanoy Investment Co., a fund managed by Access International Advisors Ltd. and entities of Hyposwiss Private Bank Geneve SA. The fund’s managers ignored warnings that the Madoff investments were fraudulent, according to the complaint.

Picard faces a Dec. 11 deadline for filing suits to recover false profits.

Madoff, 72, is serving a 150-year sentence in a North Carolina federal prison after admitting he directed the biggest Ponzi scheme in history. Madoff was arrested and his firm, New York-based Bernard L. Madoff Investment Securities LLC, forced into bankruptcy when news of the fraud became public in December 2008.

At the time of his arrest, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent balances. Investors lost about $20 billion in principal.

The case is Picard v. JPMorgan Chase & Co., 10-ap-4932, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net; Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

http://www.bloomberg.com/news/2010-12-02...ustee.html