JPMorgan aims to refute claims it had knowledge of Haddow’s scam

Maria Nikolova

The bank continues to oppose claims that it had actual knowledge of and substantially assisted Renwick Haddow’s Ponzi scheme.

JPMorgan Chase

As the lawsuit launched by victims of Ponzi scammer Renwick Haddow against JPMorgan Chase & Co. (NYSE:JPM) and JPMorgan Chase Bank, N.A. continues at the New York Southern District Court, the banks have sought to beef up their opposition to the claims that they aided and abetted the fraudster.

On Monday, August 13th, the banks submitted a reply in further support of their motion to dismiss the plaintiffs’ complaint or, in the alternative, strike certain allegations.

Let’s recall that the plaintiffs – investors in the Bar Works entities, operated by Haddow, have pled causes of action for: knowing participation in a breach of trust (Count One), aiding and abetting embezzlement (Count Two), aiding and abetting a breach of fiduciary duty (Count Three), aiding and abetting conversion (Count Four), aiding and abetting fraud (Count Five), unjust enrichment (Count Six), commercial bad faith (Count Seven), and gross negligence (Count Eight).

The plaintiffs allege that the bank knew who fraudster Renwick Haddow was as soon as he opened an account with JPMC; that the bank had actual knowledge of the breach of fiduciary duty and theft engaged in; and, after acquiring that knowledge, that the bank continued providing the assistance Renwick Haddow needed, including services which go beyond the provision of “ordinary banking services.”

Inter alia, the plaintiffs allege that JPMC ignored clearly illicit transaction activity within Haddow’s accounts – including millions of dollars in suspicious transactions from all over the world – and disregarded its own anti-money laundering policies.

In its reply, filed with the Court on August 13th, the defendants disagree with the accusations. According to JPMorgan, the plaintiffs fail to adequately plead that the banks had actual knowledge of and substantially assisted Haddow’s Ponzi scheme.

JPMorgan specifically addresses claims about the business ethics of US banks. Unsubstantiated, baseless name-calling (e.g., JPMorgan is “the preferred bank for financial fraudsters,”) is not a substitute for factual allegations showing that JPMorgan had actual knowledge that Haddow was stealing from the plaintiffs, the bank argues.

According to the defendants, the British press reports indicating that Haddow had engaged in investment misconduct five to ten years ago in Britain do not mean that the banks had actual knowledge that he was using his accounts at JPMorgan to defraud the plaintiffs. At most, such allegations support only the theory that the banks should have known that Haddow was defrauding the plaintiffs, based on allegations that JPMorgan should or must have known of his prior misconduct. Since constructive knowledge is not tantamount to actual knowledge under New York law, that theory is wholly insufficient, the defendants argue.

According to JPMorgan, the plaintiffs’ comparison of Haddow’s notoriety with Bernard L. Madoff’s post-arrest notoriety is absurd.

“Madoff’s arrest and infamous scheme were front and center in the American press for years. The same simply cannot be said as to Haddow”, JPMorgan argues.

Regarding the alleged provision of substantial assistance, the defendants reiterate their stance from previous documents filed with the Court. As was explained in JPMorgan’s moving brief, (i) providing ordinary banking services does not constitute substantial assistance, and (ii) a defendant’s inaction does not constitute substantial assistance unless the defendant owed the plaintiff a fiduciary duty.

Furthermore, JPMorgan notes that there is no cognizable unjust enrichment claim where the only “benefit” that a bank is alleged to have received is standard fees for banking services.

The case is captioned ZHAO et al v. JPMorgan Chase & Co., et al (1:17-cv-08570).

Read this next

Institutional FX

State Street launches FIX API for Fund Connect ETF platform

“Expanding from proprietary APIs to the FIX industry standard will bring us closer to our goal of 100% digital interactions. This is another example of innovations we’ve brought to our operating model as we celebrate 30 years of servicing ETFs since the launch of SPY.”

Industry News

HollyWally opens office in Portugal to bring B2B2C wallet-as-a-service platform to Europe

“We looked at a number of centers for startups throughout Europe and were attracted straight away to Lisbon. There is great Government support and enthusiasm for startups, it’s well positioned between our Asian and US offices, it’s a cost-effective city in which to base a fintech and it’s a beautiful place.”

Retail FX

Eightcap integrates Acuity’s economic calendar for trade ideas on MT4 or MT5

“By incorporating Acuity’s cutting-edge AI technology into our platform, we are able to offer our clients a powerful new tool that will help them stay ahead of the markets. We are committed to providing an extensive range of tools and educational resources that will enhance our clients’ trading experience and allow them to trade smarter.”

Inside View

Private Equity Renaissance

Recent years have seen a resurgence in the concept of trading physical equities, with a slew of new arrivals joining the market for what is arguably one of the oldest forms of investing. But what has been the driving force behind this change in momentum?

Digital Assets

Dubai introduces new crypto regulations with fines of up to $135,000

Against the backdrop of a crashing market and burned investors, Dubai has sealed a landmark rulebook that governs how the Emirate will regulate cryptocurrency activities.

Institutional FX

FX volume drops 16pct at Russia’s largest exchange in January

The Moscow Exchange, Russia’s largest exchange group, released its monthly batch of trading volumes and metrics for January 2023 – the latest readings showed a pullback across the board for multiple segments, namely in the FX, given lower volatility and a reduced trading schedule.

Institutional FX

Standard Chartered sets up wholly-owned brokerage arm in China

UK-headquartered bank Standard Chartered said its Hong Kong arm has been granted an in-principle approval for a brokerage license from the China Securities Regulatory Commission (CSRC).

Digital Assets

Revolut offers staking for Ether, Cardano, Polkadot, and Tezo

British fintech and banking firm Revolut has introduced crypto staking — a practice of earning rewards for serving as a transaction validator in the Ethereum blockchain – to its UK and European Economic Area (EEA) customers.

Inside View

Saxo releases Q1 2023 Quarterly Outlook: “The Models Are Broken”

“2023 is likely to prove a rough ride for currencies if the USD bear market fails to continue in a straight line, but EUR and JPY may outperform.”