JPMorgan Chase should pay at least $19bn to victims of the Bernard Madoff fraud for allegedly ignoring warnings about round-trip transactions with another financial institution,

JPMorgan Chase should pay at least $19bn to victims of the Bernard Madoff fraud for allegedly ignoring warnings about round-trip transactions with another financial institution, according to a revised lawsuit filed by the bankruptcy trustee.
The lawsuit, filed on Friday in New York, triples the $6.4bn in claims previously sought by Irving Picard, the court-appointed trustee for the Madoff fund. It adds new allegations that the bank disregarded warnings from a rival financial institution, which became suspicious after identifying daily circular transactions totalling at least $1m, according to the complaint, which cites testimony from two former bank employees.
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The new allegations add to the legal troubles confronting JPMorgan, which faces numerous investigations and private lawsuits stemming from the financial crisis.
On Wednesday it paid $153.6m to resolve a Securities and Exchange Commission probe into its sales of a structured mortgage security.
The amended complaint alleges that JPMorgan knew about the Madoff fraud going back to the mid-1990s when in 1997 a rival bank discovered round-trip transactions to and from the JPMorgan account. According to the complaint, a Madoff employee would draw down the account at the other financial institution at the end of every business day and then deposit a cheque with the same amount to JPMorgan, which was then Chase Manhattan bank. The size of the cheque ranged from $1m to $10m.
The following morning, roughly the same amount would be wired back to the other financial institution giving the appearance during that period that Madoff had twice the money, according to the complaint.
The unnamed financial institution became suspicious and closed the Madoff account. Mr Picard alleges that JPMorgan should have observed the same suspicious transactions, according to the complaint.
“JPMorgan not only should have known that a fraud was being perpetrated, they did know,” alleged David Sheehan, a lawyer working with Mr Picard.
JPMorgan has previously said that it complied with all laws and regulations and no employees were aware of the fraud. In addition to the new allegations, Mr Picard is seeking a jury trial.
The filing is the latest in an ongoing legal drama involving roughly 60 lawsuits seeking more than $40bn. Mr Picard has recovered $7.6bn that will be returned to Madoff customers.