JPMorgan Chase earned $900 million from Madoff’s Ponzi scheme

JPMorgan Chase made more than $900 million in pretax profits from the Madoff scam according to the findings made in the course of the latest study of Bernard Madoff’s Ponzi scheme. Dr. Linus Wilson, a finance professor at University of Louisiana at Lafayette, published the paper where he uses newly released data and different methods of calculation than previous studies.

Wilson's paper looks at total Madoff- linked account balances at JPMorgan Chase from 1986 to 2008, a longer period than earlier studies, which may have underestimated JPMorgan's profits. The total figure Wilson arrives at is $907 million.

Thereby, the figure assumes JPMorgan's reinvestment of Madoff client money, and the generation of a similar rate to that of other funds invested by the bank during a similar time period. Wilson says that even without any reinvestment at all JPMorgan's pre-tax profits from Madoff money would have amounted to an estimated $398 million.

Wilson concludes based on prior academic research, that enough 'red flags' existed to make a reasonable observer suspicious—which presumably includes JPMorgan Chase.

Wilson lists two facts as being particularly problematic. First, that Madoff's custody over his client accounts resulted in no third party verification of trades (which, as it turns out, Madoff seems to have never made). And second, the very size and regularity of Madoff's returns should have raised suspicion in itself.