JPMorgan denies providing assistance to Ponzi scammer Renwick Haddow

Maria Nikolova

The provision of ordinary banking services—such as opening accounts and allowing withdrawals or transfers, JPMorgan says, does not constitute substantial assistance, even where there is a suspicion of fraudulent activity.

JPMorgan Chase & Co. (NYSE:JPM) and JPMorgan Chase Bank, N.A., which are accused of aiding a Ponzi scheme operated by Bitcoin scammer Renwick Haddow, have sought to reply to allegations made by a group of more than 200 defrauded Chinese investors.

In documents filed with the New York Southern District Court on Friday, March 2, 2018, the bank stated its plans to file a motion to dismiss the Amended Complaint, which alleges that Chase aided and abetted Haddow’s scheme Bar Works.

The plaintiffs claim that the activity of the accounts of Haddow with the bank did not reflect the building out of co-working retail spaces, and that there was “suspicious activity” in the accounts, including large-dollar wire transfers, allegedly “visible” to JPMorgan. The plaintiffs also claim that Chase—in return for associated wire transaction fees and account revenue—chose to ignore the “unusual” account activity and related “red flags.” For instance, JPMorgan is alleged to have turned a blind eye on frequent transactions between Haddow and high risk, offshore entities, such as so-called “binary trading” firms.

Plaintiffs assert eight causes of action: (i) knowing participation in a breach of trust; (ii) aiding and abetting embezzlement; (iii) aiding and abetting fiduciary breach; (iv) aiding and abetting conversion; (v) aiding and abetting fraud; (vi) unjust enrichment; (vii) commercial bad faith; and (viii) gross negligence.

In its latest filings with the Court, JPMorgan argues that it did not assist Haddow and his scheme and that the aiding-and-abetting claims fail as the plaintiffs, according to the defendants, have not adequately pled substantial assistance. The provision of ordinary banking services—such as opening accounts and allowing withdrawals or transfers, JPMorgan says, does not constitute substantial assistance, even where there is a suspicion of fraudulent activity.

Also, the bank stresses that inaction can be substantial assistance only when a defendant owes a fiduciary duty directly to a plaintiff. No such duty is alleged or existed in this case.

According to JPMorgan, the plaintiffs also fail to plead unjust enrichment. That is because the plaintiff investors fail to allege that they had a sufficiently close relationship with the defendant bank. Similarly, the gross negligence claim is said to fail too, since the plaintiffs were not customers of Chase in relation to the account activity at issue here. Hence, the bank insists it had no legally recognized duty of care to them.

The case, captioned ZHAO et al v. JPMorgan Chase & Co., et al (1:17-cv-08570), continues at the New York Southern District Court.

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