US District Judge John Koeltl in Manhattan ruled that the investors in the Ponzi scheme failed to prove that JP Morgan did have control on Madoff’s fraudulent actions.
The investors had alleged that the bank did not consider the warnings raised over the fraud and it made profits by continuing its relationship with Madoff.
The judge said the allegations at most suggested that JPMorgan and its employees "were negligent, not fraudulent" in dealing with Madoff, who was its customer for two decades before his arrest in December 2008, Reuters reported.
The lawsuit was filed by 2,500 former Madoff customers who withdrew more money from their accounts with Madoff than they invested.
Koeltl was quoted by Bloomberg as saying: "These allegations, at most, support an inference that JPMorgan had constructive, not actual, knowledge of the Madoff Ponzi scheme and that JPMorgan and its employees were negligent, not fraudulent,"
Investors alleged that JPMorgan failed to end its relationship with Madoff and did not inform the market regulator about its suspicious activity.
The lawsuit was filed in 2014 after the bank agreed to $2.6bn to settle the allegations made against it for failing to monitor and prevent Madoff’s fraud.
Overall, it paid $1.7bn as government charges to settle claims over its failure to take suitable measures to check Madoff’s fraud.
The bank paid $350m for not being able to report Madoff’s suspicious activities and over $500m to settle litigation issues.
Currently, Madoff is serving 150 years jail-term in a federal prison in North Carolina after being convicted for carrying out a massive Ponzi scheme.
Many other global banking majors, including Barclays, HSBC, and UBS, were sued in the case.
Image: JP Morgan office building, 25 Bank Street, London, UK. Photo courtesy of Lord Mauleverer/Wikipedia.
