Defrauded Chinese investors insist JPMorgan provided substantial assistance to Ponzi scammer

Maria Nikolova

Although JPMorgan had no fiduciary duty to the investors defrauded by Renwick Haddow, the bank is said to have nevertheless provided substantial assistance to the scammer as its nonfeasance amounts to knowing facilitation of a crime.

A case targeting JPMorgan Chase & Co. (NYSE:JPM) and JPMorgan Chase Bank, N.A. over their alleged aiding and abetting “Bar Works” – a Ponzi scheme operated by Renwick Haddow, continues at the New York Southern District Court. After the defendants sought to rebuff the accusations earlier this month by arguing that they did not provide any substantial assistance to Haddow, the plaintiffs have replied to this attempt for defense.

On Wednesday, March 14, 2018, the counsel for the 245 plaintiffs in the action, captioned ZHAO et al v. JPMorgan Chase & Co., et al (1:17-cv-08570), filed a Letter with the Court.

In the Letter, addressed to the Honorable Naomi Reice Buchwald, the plaintiffs argue again that JPMorgan had actual knowledge of the “Bar Works” fraud. The most solid facts which are seen to support the bank’s actual knowledge involve the notoriety and infamy of the Bar Works scheme’s mastermind, Renwick Haddow. He is also known for other fraudulent schemes, including ones involving Bitcoin. The plaintiffs insist that JPMorgan had been aware of Haddow’s true identity and his fraudulent activities while he presented himself under a fake name in communications with “Bar Works” investors.

The plaintiffs expect that discovery of documents will substantiate their allegations, that a known international fraudster, an individual banned from acting as a company director in his home country, attracted the notice of JPMorgan employees following standard banking practices and the bank’s own KYC/AML policies. Plaintiffs expect to find routine alerts triggered by the defendants’ transaction monitoring system, the contents of the defendants’ KYC file on Renwick Haddow, internal communications among the bank’s employees discussing Haddow’s prior schemes, and other internal documents and communications indicating the bank’s actual knowledge.

The plaintiffs also note the transfers to luxury goods purveyors and foreign accounts outside of the scope of Bar Works’ business, including binary options firms. These, the plaintiffs say, cannot be presumed routine or typical banking transactions, and amounted to substantial assistance.

Substantial assistance occurs when a defendant affirmatively assists, helps conceal or fails to act when required to do so, thus enabling the breach to occur. The general rule is that mere inaction of an alleged aider and abettor constitutes substantial assistance only if the defendant owes a fiduciary duty directly to the plaintiff. JPMorgan has argued that it owes no such duty to the plaintiffs in this case. In their latest Letter, the defrauded investors note New York courts have found substantial assistance, even without a fiduciary duty owed to the plaintiff, when such nonfeasance amounts to knowing facilitation of a crime.

Given the fees that JPMorgan received from Haddow’s bank account transactions, the plaintiffs argue that, at the pleading stage, they have managed to state a sufficient claim under New York law for negligence and unjust enrichment against the bank.

Previously filed documents indicate that the plaintiffs claim combined $16,907,626.00 in damages.

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