JPMorgan To Pay $1.7 Bln To Settle Allegations Over Role In Madoff Scandal

(RTTNews) - JPMorgan Chase & Co. (JPM) has agreed to pay $1.7 billion to the United States as part of an agreement that it entered with the authorities over its role in Bernard Madoff's massive Ponzi scheme.

JPMorgan Chase entered into a two-year deferred prosecution agreement with the U.S. Attorney for the Southern District of New York, whereby it consented to the filing of a two-count information in the United States District Court for the Southern District of New York, charging the bank with failure to maintain an effective anti-money laundering program and failure to file a suspicious activity report.

The government plans to distribute the funds to the victims of the fraud at Bernard L. Madoff Investment Securities LLC, the hedge fund operation through which Madoff ran his Ponzi scheme.

As part of the deal, JPMorgan Chase has agreed not to apply for a tax deduction or tax credit for any portion of the $1.7 billion payment.

For more than three decades, the Madoff Securities investment business was a massive, multi-billion dollar Ponzi scheme that was conducted almost exclusively through a demand deposit account and other linked cash and brokerage accounts held at JPMorgan Chase Bank.

Madoff was eventually arrested in December 2008 in the height of the financial crisis. Convicted in 2009 of defrauding thousands of investors, he is serving a 150-year prison sentence.

The $1.7 billion settlement is touted to be the largest ever bank forfeiture and the largest Department of Justice penalty for a Bank Secrecy Act violation.

The deal is similar to one reached in December 2012 in which HSBC Holdings Plc (HSBA.L, HBC) agreed to pay $1.9 billion to resolve allegations of money laundering and violations of U.S. sanctions on Iran.

The $1.7 billion settlement is the latest in a series of major deals JPMorgan has reached in recent times to resolve its legal woes. Last year, the bank agreed to pay $15.7 billion to settle other U.S. regulatory probes into risky mortgage securities sales practices and other matters.

JPMorgan shares are currently trading at $58.26, down 74 cents or 1.25%.