Moral Hazard

In: Business and Management

Submitted By kushkiki
Words 1726
Pages 7
JP MORGAN & CHASE CO. TURNS BLIND EYE TO PONZI SCHEME: MORAL HAZARD PROBLEM
Banks have been at the forefront of the financial system for as long as they have existed and have captured the attention of stakeholders on both controversial grounds as well as being undisputed with regards to the many helpful services they provide. JP Morgan & Chase is one such bank, surrounded by hostile news articles and excessive scrutiny but rightfully so as it has of recent been the topic of much controversy as turning a blind eye to the moral codes established by the Securities and Exchange Commission (SEC) and assisting Ponzi Scheme masterminds in swindling unsuspecting investors.
On January 7th, 2014, JP Morgan was accused of assisting its high profile client of two decades, Bernard Madoff, a mastermind ponzi schemer in executing his goal of duping investors into parting with their savings worth a whopping $17.3billion of which included pension funds that belonged to JPM shareholders. The bank was fined a penalty of close to $2billion stemming from two felony violations of the Bank Secrecy Act, which is a federal law that requires banks to alert authorities to suspicious activity. The bank was further required to pay $543million in resolving private claims over losses tied to the scheme. A reported $9.5billion has been recovered whilst almost $4.9billion has been returned to investors. It can be agreed that this by far does not compensate for the losses the investors incurred. The Justice Department and Comptroller’s office is adamant that the JPM case is over and agree that further action will be warranted.
JP Morgan (JPM) however, faced a similar lawsuit in 2008 that accused the bank of assisting another ponzi scheme perpetrated by William Wise, who managed to defraud his customers sums of money worth between $68-$200millon, was dismissed on the grounds that JPM was…...

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