December 02, 2010 by CHAD BRAY

The trustee seeking money for victims of Bernard Madoff’s Ponzi scheme sued J.P. Morgan Chase & Co. for more than $6 billion, claiming the bank enabled his multibillion-dollar fraud.

 

The lawsuit is the latest salvo by Irving Picard, who has filed a flurry of cases in recent days seeking to claw back improper profits from the fraud. Mr. Picard has a deadline of Dec. 11 to bring the lawsuits to recover assets for victims, the two-year anniversary of Mr. Madoff’s arrest and the day his firm filed for bankruptcy protection.

 

This week, he filed more than 100 lawsuits against “net winners,” people who withdrew more money than they originally invested with Mr. Madoff. Last week, he sued relatives, former employees and customers of the convicted felon.

 

“J.P. Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” said David J. Sheehan, a lawyer for Mr. Picard, in a statement. “While many financial institutions enabled Madoff’s fraud, [J.P. Morgan Chase] was at the very center of that fraud, and thoroughly complicit in it.”

 

J.P. Morgan said any suggestion it supported Mr. Madoff’s fraud is “utterly baseless and demonstrably false.”

 

“The complaint filed today by the trustee for the Madoff estate distorts both the facts and the law in an attempt to grab headlines,” J.P. Morgan said in a statement. “Contrary to the trustee’s allegations, J.P. Morgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff. As a provider of regular commercial banking services to Madoff’s brokerage firm, J.P. Morgan complied fully with all applicable laws and regulations governing customer accounts.”

 

The Wall Street bank said it has shared significant information with the trustee and addressed his questions since the fraud was disclosed.

 

“J.P. Morgan intends to defend itself vigorously against the meritless and unfounded claims brought by the trustee,” the bank said.

 

The complaint, filed in federal bankruptcy court in Manhattan on Thursday, is seeking the return of nearly $1 billion in profits and fees, as well as additional damages of $5.4 billion.

 

The lawsuit claims J.P. Morgan had clear suspicions about the legitimacy of Mr. Madoff’s operations but didn’t act on that information, Mr. Picard said in a statement. The full complaint was filed under seal with the bankruptcy court.

 

The case is one of the largest brought by Mr. Picard in the Madoff matter. He has sued the estate of Florida businessman Jeffry Picower, claiming Mr. Picower withdrew $7.2 billion from his accounts with Madoff. Mr. Picard is negotiating with Mr. Picower’s estate.

 

Mr. Madoff, who admitted in March 2009 to carrying out the decades-long Ponzi scheme, is serving a 150-year sentence in a federal prison in North Carolina.

 

Write to Chad Bray at chad.bray@dowjones.com