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

Digital Assets

Top exec at BitMEX pled guilty US Bank Act violations, pays $150K fine

BitMEX’s head of business development, Gregory Dwyer pled guilty to violating the US Bank Secrecy Act (BSA) and allowing customers to use the platform to circumvent the federal anti-money laundering rules.

Retail FX

CySEC slaps €150,000 fine on FXBFI, operator of 101investing brand

The Cyprus Securities and Exchange Commission (CySEC) today announced that it has reached a settlement with FXBFI Broker Financial Invest Ltd, trading as 101investing, ordering the firm to pay €150,000 for violating the Investment Services and Activities and Regulated Markets Law.

Retail FX

X Open Hub expands multi-asset offering with new cryptocurrencies and indices

X Open Hub, a multi-asset liquidity provider, announced today that it has extended its offering with inclusion of 30 new cryptocurrencies and two emerging market indices.

Retail FX

Interactive Brokers now offers 24/7 access to crypto trading

Interactive Brokers Group, Inc. (NASDAQ: IBKR) has widened access to cryptocurrency trading for its clients. Specifically, the discount broker extended trading hours for its cryptocurrency products to be traded 24/7, including on the weekends.

Inside View

Natural Language Generation for Multi-Language Social Media Strategies 

Natural Language Generation (NLG) is a crucial growth area in the digital landscape, with the unique potential to be used across multiple industries.

Market News, Technology

The B2Core Android App is Now Available For Download

The first version of the B2Core Android app is available for download, and it has many beneficial features for users.

Digital Assets

XBO taps custodian Fireblocks ahead of crypto exchange’s launch has integrated with digital asset and crypto technology platform Fireblocks ahead of the crypto exchange’s upcoming launch.

Industry News

Appital raises another £1.7m after integrating with FactSet, FlexTrade, and TS Imagine

“Appital has a proven track record in securing partnerships with major EMS providers, executing brokers and a trading venue to address the lack of efficiency and control over existing bookbuilding and deal distribution processes.”

Digital Assets

Tim Draper backs crypto-focused asset manager OSD in seed round

“The Old Street Digital team is well-positioned to provide access to a range of research-backed, crypto-based investment funds, and we at Draper Associates are excited to support them.”