Numerous Chinese investors defrauded by Ponzi scheme Bar Works, say JPMorgan failed to spot the red flags around the activity of the scammers’ bank account with JPMorgan.
A group of 27 Chinese investors who were defrauded by Bar Works, a Ponzi scheme operated by Renwick Robert Haddow, are suing JPMorgan Chase & Co. (NYSE:JPM) and JPMorgan Chase Bank, N.A. over failure to react accordingly to the suspicious activity of the scammers’ bank account with JPMorgan.
Each of the plaintiffs invested in Bar Works entities, whose mastermind was Renwick Robert Haddow. He used the entities to perpetrate a massive Ponzi scheme upon the plaintiffs. Each of the plaintiffs was specifically advised to send his/her investment proceeds to Bar Works Inc’s bank account at JPMorgan Chase Bank, believing that to be a sign that Bar Works was a reputable business.
In their complaint, filed with the New York Southern District Court, the plaintiffs allege that JPMorgan knew that Bar Works was an elaborate Ponzi scheme.
In addition, the plaintiffs say that JPMorgan had actual notice that Haddow was laundering investors’ money, as a result of Bar Works Inc’s deposits being immediately transferred out of the business operating account to known overseas money laundering havens such as Mauritius, the Seychelles and Morocco.
The complaint mentions numerous suspicious transactions, which should have triggered investigations and reports to regulators, including:
- Amounts being transferred to 27 countries identified as major money laundering countries by the United States Department of State.
- International wire transfers worth $3.8 million to Portugal, Spain, Cyprus and Poland. Cyprus and Spain are identified as countries of primary concern by the Department of State. Poland and Portugal are identified as countries of concern by the Department of State.
- About $6.3 million was transferred to Morocco, Isle of Man and Mauritius – major money laundering centres.
There were numerous “red flags” that JPMorgan should have noticed and should have reacted to, the plaintiffs say. The list of such “red flags” include suspicious wire activity with offshore entities.
“Through the bank account with JPMorgan, Haddow frequently engaged in transactions with high-risk, offshore entities, such as so-called “binary trading” operations”, the plaintiffs say.
The defendants are accused of participation in a breach of trust, aiding and abetting embezzlement, aiding and abetting breach of fiduciary duty, aiding and abetting conversion, unjust enrichment, commercial bad faith, and gross negligence. The plaintiffs claim combined $3,050,000 in damages.
The case is captioned ZHAO et al v. JPMorgan Chase & Co., et al (1:17-cv-08570).