JP Morgan reaches $1.7bn settlement over Madoff fraud

US investment bank JP Morgan has reached a settlement agreement with federal prosecutors, after it was accused of ignoring warnings over fraud crimes by former trader Bernard Madoff.

Madoff constructed a highly sophisticated trading mechanism, by which he backdated transactions and was able to manipulate the returns paid to customers before accounts had even been opened.

In a press conference, the head of the FBI’s New York office George Venizelos said, “It took until after the arrest of Madoff, one of the worst crooks this office has ever seen, for JP Morgan to alert authorities to what the world already knew.”

According to documents released by the US Attorney’s Office, JP Morgan had a relationship with Madoff dating back to 1986, but ending in 2008 when the trader admitted to the FBI that his schemes were fraudulent.

Although no individual from the bank has been prosecuted, some suggest that flags were raised by employees at the bank and no action was taken until authorities intervened in 2008.

Commenting on the fine, JP Morgan spokesperson Jennifer Zuccarelli said, “We recognise we could have done a better job.”

The fresh fines for the bank bring the total spent on regulatory fines over the past 12 months close to $20 billion (£12.2bn).

It was ordered to pay $100m for its part in the “London Whale” scandal, $13bn over allegations that it misled investors during the housing crisis and a share of €1.7 billion, split between eight banks, for rigging EU interest rates.

Further reading:

RBS among eight major banks fined by EU over rate-rigging

JP Morgan accepts $100m fine over ‘London Whale’ incident

JP Morgan fined $920m by UK and US regulators over ‘London Whale’ cover-up

JP Morgan given record $13bn fine for misleading investors

JP Morgan nearing $13bn record banking fine over mis-selling