JP Morgan to Pay $20 Million in Lehman Case
It was revealed on Wednesday that JP Morgan Chase has agreed to pay a fine of $20 million following allegations that the bank mishandled Lehman Brothers funds over 22 months until the broker filed for bankruptcy.
According to the Financial Times, the Commodity Futures Trading Commission alleged that JP Morgan started using customer funds to calculate how much credit it would extend to Lehman Brothers intraday in November 2006 at the request of Lehman. That action violates customer segregation account rules.
JP Morgan and all financial institutions like it cannot treat customer money as though it belongs to any body other than that customer. To do so places the institution in clear breach of the CFTC rules and regulations.
As a result of the unfair actions, JP Morgan extended more money to Lehman Brothers than it should have done, according to the CFTC.
But it doesn't stop there. The CFTC says that JP Morgan misused customer funds for all of those 22 months, up until the point that Lehman filed for bankruptcy in September 2008. In addition, it is alleged that JP Morgan failed to return $333 million in customer money to either Lehman or its court-appointed trustee until two months after the bankrupct occurred.
Records have been broken, as this fine represents the biggest amount the CFTC has collected in a customer segregation case.
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