JPMorgan paying $153.6 million to settle fraud charges
Following civil fraud charges that it misled buyers as the housing market was collapsing, the financial powerhouse has agreed to pay off a handful of investors, including a faith-based membership organization, an insurance and retirement services company and several Asian banks. The settlement will pay back all of the defrauded investors in full. In addition, JPMorgan says it aims to review and approve its mortgage securities transactions.
In the settlement, however, the bank did not admit or deny any wrongdoing.
While one-and-a-half hundred million might seem like a pretty penny, that figure makes up less than one percent of JPMorgan’s net income last year. In 2010 they raked in around $16.7 billion. Last year Goldman Sachs & Co. handed out $550 million to settle similar charges filed against them — which was only five percent of their net income from the previous year.
In the JPMorgan suit, the Securities and Exchange Commission alleges that the bank failed to disclose to investors that the Magnetar Capital hedge fund played a huge role in choosing the securities — and would benefit handsomely if they defaulted. A month before, SEC says that JPMorgan launched a "frantic global sales effort" which far exceeded its traditional sales blast.
Of the $153.6 million, almost all will be returned to the investors that lost out. Around $28 million more will fall into the hands of the US Treasury.