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Jamie Dimon Knows a Fraud When He Sees It – Outside of His Bank

Courtesy of Pam Martens

Jamie Dimon, Chairman and CEO of JPMorgan Chase, Testifying Before Congress

Jamie Dimon, Chairman and CEO of JPMorgan Chase, Testifying Before Congress

Jamie Dimon became Chief Executive Officer of JPMorgan Chase on December 31, 2005. An inordinate amount of frauds have been perpetrated inside his bank since that time, none of which the eagle-eyed Dimon spotted. But Dimon says he knows a fraud when he sees one outside of his bank. Yesterday, he took on the cryptocurrency known as Bitcoin, calling it a fraud. At a banking conference on Tuesday, Dimon said that “Bitcoin will eventually blow up. It’s a fraud. It’s worse than tulip bulbs and won’t end well.”

We’re not saying Dimon is wrong about Bitcoin. In fact, more than three years ago Wall Street On Parade compared Bitcoin to the tulip bulb bubble and explained in crystal clear terms how it differs from a real currency, such as the U.S. dollar. But we are saying that Dimon’s super sleuth nose for fraud has the uncanny knack of serially failing him when it comes to Ponzi schemes and mortgage frauds and rogue derivative and commodity traders operating inside his own bank – a taxpayer subsidized institution that has richly rewarded Dimon despite the fact that his sniffer can only catch the scent of fraud outside the doors of JPMorgan Chase. (As of June 30, 2017, according to the Federal Deposit Insurance Corporation, JPMorgan Chase held more than $1.5 trillion in deposits, the majority of which are insured by the Federal government and backstopped by the U.S. taxpayer.)

On March 22, 2016, the Government Accountability Office (GAO) released a report that noted that the U.S. Justice Department had earlier assigned a $1.7 billion forfeiture against JPMorgan Chase “for its failure to detect and report the suspicious activities of Bernard Madoff,” the largest fraud ever perpetrated against the investing public. The GAO stunningly found that because the bank “failed to maintain an effective anti-money-laundering program and report suspicious transactions in 2008, it contributed to its own bank customers “losing about $5.4 billion in Bernard Madoff’s Ponzi scheme.”

Justice Department investigative material, much of which came from Irving Picard, the trustee for the Madoff victims’ fund, showed that JPMorgan Chase had relied on unaudited financial statements and skipped the required steps of bank due diligence to make $145 million in loans to Madoff’s business. Lawyers for Picard wrote that from November 2005 through January 18, 2006, JPMorgan Chase loaned $145 million to Madoff’s business at a time when the bank was on “notice of fraudulent activity” in Madoff’s business account and when, in fact, Madoff’s business was insolvent. The JPMorgan Chase loans were needed because Madoff’s business account, referred to as the 703 account, was “reaching dangerously low levels of liquidity, and the Ponzi scheme was at risk of collapsing,” according to Picard. JPMorgan, in fact, “provided liquidity to continue the Ponzi scheme,” the Picard investigators found.

In November 2013, Picard had asked the U.S. Supreme Court to review an appellate court’s ruling that barred him from suing JPMorgan and other banks for aiding the Madoff fraud in order to recover additional funds for victims. In his Supreme Court petition, Picard stated that JPMorgan Chase stood “at the very center of Madoff’s fraud for over 20 years.” This assertion was based on Picard’s lower court filing that demonstrated that the bank was aware that Madoff was claiming to invest tens of billions of dollars in a strategy that involved buying large cap stocks in the Standard and Poor’s 500 index while simultaneously hedging with options. But the Madoff firm’s business account at JPMorgan, which the bank had access to review for over 20 years, showed no evidence of payments for stock or options trading.

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