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JPMorgan Pays for Shorting Madoff Without Telling Anyone

bloomberg.com

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Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#51

Post by blah32497 »

bonemachine wrote: post #37
trader wrote: post #34

Earlier quoted context omitted.

If they really though there was fraud, why wouldnt they have taken a huge short position and reported to the SEC, accelerating the winddown process. This is what saba did with the JPM whale trades, they took a huge CDS position and reported the "whale", making 100mm+. They didnt do this because a) they didnt know about the fraud, or b) didnt want to hurt their clients. Everyone likes to point the finger at someone el…

If they really though there was fraud, The issue at hand (and for which JPMorgan was fined) wasn't whether they definitively knew, or "thought" there was a fraud or not. It was for specific violations of the Bank Secrecy Act: failing to report suspicious activity, and failing to create specific controls against money laundering. All of the recent press articles are really quite clear about this. You may not agree wit…

Does anyone else think it's kinda crazy that banks are required by law to act like policemen? Seems like that's the government's job.

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#52

Post by blah32497 »

bonemachine wrote: post #49
refurb wrote: post #3

Earlier quoted context omitted.

Did you read the article? The basically got fined for not doing the SEC's job.

The basically got fined for not doing the SEC's job. No, that's not what they were fined for. They were fined for not doing their job, according to the Bank Secrecy Act. Which they agreed to comply with when they decided to become a bank. You might want to read a couple of news articles about the case, before pulling "facts" out of the air like this.

"They were fined for not doing their job"

Which in this case was also the SEC's job... Your statement doesn't contradict refub's

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#53

Post by bonemachine »

blah32497 wrote: post #51
bonemachine wrote: post #37

Earlier quoted context omitted.

If they really though there was fraud, The issue at hand (and for which JPMorgan was fined) wasn't whether they definitively knew, or "thought" there was a fraud or not. It was for specific violations of the Bank Secrecy Act: failing to report suspicious activity, and failing to create specific controls against money laundering. All of the recent press articles are really quite clear about this. You may not agree wit…

Does anyone else think it's kinda crazy that banks are required by law to act like policemen? Seems like that's the government's job.

Whatever, but that's not what the current legislation says.

Which JPM agreed to be in compliance with in order to be granted a license to go out and do this "banking" thing.

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#54

Post by bd_at_rivenhill »

RockyMcNuts wrote: post #40
trader wrote: post #23

This is a very misleading article in my opinion. Investment banks provide investors access to risks which they want, in this case investors WANTED access to Madoff structured notes because Madoff had been outperforming, therefore JPM had a find a way to hedge themselves to reduce their risk. After investing a tremendous amount in madoff, JPM probably realized that they could hedge easier by going long the general mar…

TFA defends JPM and skeptically deconstructs the accusation, so this comment is forehead-slappingly stupid. If someone comes to an investment bank and asks for access to something that the investment bank knows is a fraud, and the bank provides it and takes the fee, while ending up short the fraud... that's a bit of a problem. As Madoff's banker with billions of dollars on deposit, JPMorgan can see every cash flow. B…

They didn't tell Madoff's banker probably because they couldn't as a result of Chinese wall requirements between the two businesses. They didn't tell the SEC because they were in London, but they did tell the UK authorities. Why didn't the UK authorities figure it out? Why should JPM, which sort-of has the job of detecting fraud, be expected to do better than the regulators for whom it is their primary purpose?

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#55

Post by qq66 »

blah32497 wrote: post #51
bonemachine wrote: post #37

Earlier quoted context omitted.

If they really though there was fraud, The issue at hand (and for which JPMorgan was fined) wasn't whether they definitively knew, or "thought" there was a fraud or not. It was for specific violations of the Bank Secrecy Act: failing to report suspicious activity, and failing to create specific controls against money laundering. All of the recent press articles are really quite clear about this. You may not agree wit…

Does anyone else think it's kinda crazy that banks are required by law to act like policemen? Seems like that's the government's job.

Everyone is required to act like police to some extent. If someone comes into your sporting goods store looking to buy a baseball bat to attack his neighbor, you're required not to sell it to him (and in some jurisdictions, you're required to call the police).

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#56

Post by RockyMcNuts »

bd_at_rivenhill wrote: post #54
RockyMcNuts wrote: post #40

Earlier quoted context omitted.

TFA defends JPM and skeptically deconstructs the accusation, so this comment is forehead-slappingly stupid. If someone comes to an investment bank and asks for access to something that the investment bank knows is a fraud, and the bank provides it and takes the fee, while ending up short the fraud... that's a bit of a problem. As Madoff's banker with billions of dollars on deposit, JPMorgan can see every cash flow. B…

They didn't tell Madoff's banker probably because they couldn't as a result of Chinese wall requirements between the two businesses. They didn't tell the SEC because they were in London, but they did tell the UK authorities. Why didn't the UK authorities figure it out? Why should JPM, which sort-of has the job of detecting fraud, be expected to do better than the regulators for whom it is their primary purpose?

SEC examiner gets duped by fake records and doesn't check the real bank records -> should probably be fired and the agency investigated

JPMorgan banker, who has all the cash flows, doesn't bother to notice they don't add up and billions are missing -> should probably be fired and JPMorgan should be fined.

One person's incompetence doesn't excuse the other's. Especially when one gets fake records and the other knows the real numbers.

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#57

Post by josephlord »

ck2 wrote: post #50

What percent of their profit was that and how few months will it take for them to make it up? I think society would happily trade that for actual prison time for a bunch of execs who knew exactly what was going on.

Did you read the full article? I was expecting some evil screwing of their customers and putting themselves massively short on Madoff and them to have got off lightly but actually (based solely on this Bloomberg article) got the impression that the punishment was harsh.

From the TFA they were long but in the process of unwinding their position (albeit slightly faster than they helped their customers to do) and they filed the report of suspicions in London but not in the US (by oversight). The other problem seems to have been that the chinese wall between the speculators and the account managers was respected.

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#58

Post by josephlord »

jonknee wrote: post #31
trader wrote: post #23

This is a very misleading article in my opinion. Investment banks provide investors access to risks which they want, in this case investors WANTED access to Madoff structured notes because Madoff had been outperforming, therefore JPM had a find a way to hedge themselves to reduce their risk. After investing a tremendous amount in madoff, JPM probably realized that they could hedge easier by going long the general mar…

... Did you miss the part about JPM also being Madoff's bank? They sold investments run by their own client (who would not allow due diligence!) to other clients while finding evidence that there was no way the returns could be genuine. Instead of following the law in this situation they ended up trying to make money off the phony securities before they were publicly discovered to be fraudulent.

Yes but there should be chinese walls between investment brokers and those managing a companies account. They should have reported to the US authorities (they did report to the UK ones) but revealing to other departments or worse to investment customers information from a customer's bank account would be highly unethical wouldn't it?

I knew nothing about this case before this article and am assuming the article is correct.

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#59

Post by ig1 »

bonemachine wrote: post #28
spinlock wrote: post #11

Earlier quoted context omitted.

So, you think the punishment should fit the revenue rather than the crime? JPM reported Madoff to the SEC in the 90's. They also reported him to the British banking authorities much more recently. The "crime" is actually looking at Madoff's activities and divesting themselves from him. I have no problem with JPM shorting or otherwise taking advantage of this fraud. Given that the SEC is asleep at the switch, the shor…

JPM reported Madoff to the SEC in the 90's. They also reported him to the British banking authorities much more recently. Also: the actions for which JPM was recently fined concern primarily the years 2007 and 2008. JPM may have acted differently in the 1990s, but that's practically irrelevant to what happened ten years later -- especially given the extent to which the size, and the number of unsophisticated investor…

It was a UK trading desk at JPM that identified it as suspicious and reported it in the UK. It's pretty blurry about what the reporting requirements should be in such cases.

Should firms be required to report any suspicious activity found by any team in any location to every regulator that covers them ?

(generally the rule at most banks is to report it to the legal team who then figures out who should be notified)

Re: JPMorgan Pays for Shorting Madoff Without Telling Anyone

#60

Post by 3825 »

colinbartlett wrote: post #21
andylei wrote: post #16

Earlier quoted context omitted.

Let's say I had a short equity position in some company. Now, some bad guy comes and murders the CEO of that company, tanking the equity. A crime was committed, and I profited. Did I profit from a crime? Did I do something wrong?

You did if you had prior evidence that the bad guy was going to murder the CEO.

If I know of a criminal conspiracy and don't report it am I a criminal? It sounds unfair, doesn't it? I mean I didn't take part in the conspiracy or the crime...
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