BRITISH investors who were burned in the Bernie Madoff scandal are set to get some of their money back, after the US authorities yesterday levied a $1.7bn (£1bn) fine on JP Morgan.
Regulators said the bank bore some of the blame for the fraud by hosting Madoff’s accounts and failing to report concerns over his behaviour.
The settlement – the largest ever paid by a bank to resolve anti-money laundering violations – will go to investors worldwide who lost out in the fraud, which was uncovered in 2008.
A ponzi scheme run by Madoff lost around $17.5bn, landing the fraudster a 150-year prison sentence in 2009.
Investigators and accountants have been combing through Madoff’s investments and hope that more than two-thirds of the losses – once JP Morgan’s contribution is included – could be recovered for investors.
Those investors are expected to include major UK names including Man Group and fund of funds EIM, headed by Arpad Busson. Investment trust Aberdeen Private Equity may also be a beneficiary. Aberdeen Asset Management bought the fund – set up by Nicola Horlick and managed by RMF – after the scam was uncovered. Several council pension funds may also recover some losses. The investors declined to comment.
Investigators said yesterday they had found evidence that some JP Morgan staff had doubts about Madoff, but failed to disclose them. Even as early as 1998 a fund of funds manager at the bank would not invest as Madoff’s returns looked “too good to be true.”
JP Morgan also settled two private lawsuits, paying out a total of more than $500m for the class actions.
“We recognise we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time,” the bank said. “We do not believe that any JP Morgan Chase employee knowingly assisted Madoff’s Ponzi scheme.”