JPMorgan pays $1.7B to settle Madoff charges

JPMorgan has agreed to pay the U.S. $1.7 billion for housing the accounts of Ponzi schemer Bernie Madoff and failing to notify authorities of fishy activity.

The deal, announced by the government Monday, marks the close of another large legal settlement for the nation’s largest bank just weeks after it struck a $16 billion deal with regulators to settle charges stemming from trades made leading up to the financial crisis.

{mosads}The bank agreed to a deferred prosecution agreement.

The government had claimed that JPMorgan failed to identify the odd trading activity conducted by Madoff during the decades he kept accounts with the bank, building up a multibillion-dollar Ponzi scheme. The government charged that JPMorgan willfully lacked the needed policies to detect potential money laundering behavior and also failed to notify authorities of suspicious activity.

For example, the government complaint notes October 2006 memos from a JPMorgan analyst who noted the bank’s inability to validate Madoff’s trading activity. The analyst noted the bank “seem[ed] to be relying on Madoff’s integrity.”

Under Monday’s agreement, JPMorgan agreed to cooperate for two years with the ongoing investigation into the Madoff scandal.

The government plans to take the $1.7 billion and distribute it to Madoff victims. Madoff, now serving a 150-year prison sentence, lost clients an estimated $18 billion.