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9th Circuit dismisses Ponzi scheme lawsuit against JPMorgan

Investors did not fully present claims to FDIC first, as required by law

The 9th Circuit ruled on Tuesday that JPMorgan Chase & Co. cannot be held responsible for the activities of the failed bank it purchased, Washington Mutual Inc. (WaMu), which allegedly helped advance a Ponzi scheme at Millennium Bank in the Caribbean.

A grand jury charged William Wise and Jacquline Hoegel with fraud and conspiracy last month for selling CDs to investors through their companies Millennium, United Trust of Switzerland and Sterling Bank and Trust, and promising high rates of return while actually just pocketing the money or using it to pay off earlier investors. The Securities and Exchange Commission filed civil fraud charges against them in March 2009.

Investors wanted to hold JPMorgan liable for the banking services that WaMu provided to Millennium, claiming that WaMu was aware of the fraud while it was going on. They brought fraudulent deposit certificates from Millennium, but the 9th Circuit ruled that they had not first pursued all remedies with the Federal Deposit Insurance Corporation before suing JPMorgan, and further, didn’t show that JPMorgan in any way helped advance the alleged fraud.

Read more at Thomson Reuters.

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