Victims of Ponzi scammer Renwick Haddow to appeal from judgment in case against JPMorgan

Maria Nikolova

More than 200 victims of Haddow are appealing from a judgment which dismissed claims that JPMorgan aided the scammer.

Less than a month after Judge Naomi Reice Buchwald of the New York Southern District Court dismissed a case brought by victims of Ponzi scammer Renwick Haddow against JPMorgan Chase & Co. (NYSE:JPM) and JPMorgan Chase Bank, the plaintiffs have stated their intentions to appeal from the judgment.

In a notice filed with the Court today, more than 200 victims of the scammer say they are appealing to the United States Court of Appeals for the Second Circuit from a final Judgment granting the defendants’ motion to dismiss the first amended complaint entered in this action on March 13, 2019.

At this point, no more information is provided by the plaintiffs on how they intend to proceed with their appeal.

Let’s recall that the plaintiffs – Hongying Zhao and 244 other individuals, have brought this action against JPMorgan Chase Bank, N.A. (JPMC) and its holding company JP Morgan Chase & Co. The First Amended Complaint asserts the following claims against both defendants: (1) knowing participation in a breach of trust, (2) aiding and abetting embezzlement, (3) aiding and abetting breach of fiduciary duty, (4) aiding and abetting conversion, (5) aiding and abetting fraud, (6) unjust enrichment, (7) commercial bad faith, and (8) gross negligence. Put briefly, the plaintiffs alleged that JPMorgan had aided Haddow.

The Complaint’s primary allegation is that defendants were willfully blind to the fact that non-party Renwick Haddow and his company “Bar Works” were perpetrating a fraud on their investors. On or about February 4, 2016, Haddow opened depository bank accounts for two Bar Works entities at JPMC (the “622 account” or the “379 account”). The plaintiffs mention several examples of account activity that they allege alerted or should have alerted JPMC to the fraudulent nature of the Bar Works enterprise. According to the Complaint, transaction activity from Haddow’s accounts at JPMC generated tens of thousands of dollars in transaction fees for the bank. The plaintiffs further allege that fees associated with the transactions constituted a “large percentage of the wired amount.” As a result of JPMC’s actions, plaintiffs allege that they lost nearly $17 million in capital that they had invested in Bar Works.

The Judge noted that merely stating that JPMorgan knew Haddow was using the bank’s accounts as fiduciary accounts is plainly conclusory (and elides the fact that the JPMC accounts were ordinary depository accounts rather than specially designated fiduciary or trust accounts). Also, the mere fact that JPMorgan had access to the private placement memorandum (PPM) is irrelevant without sufficiently particular factual allegations that the PPM contained specific indications that the relationship between Haddow and/or Bar Works and investors rose to the level of fiduciary.

The Judge also said that the plaintiffs fail to adequately allege that JPMorgan had actual knowledge of any breach of obligations running from Haddow or Bar Works to plaintiffs. The plaintiffs’ argument that JPMorgan’s knowledge of frequent withdrawals, wire transfers to accounts in countries recognized as money laundering havens, and the single transfer recall request constitute “actual knowledge” of a breach of fiduciary duty or fraudulent scheme was also found to be unpersuasive.

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