WASHINGTON — JPMorgan Chase agreed to pay $20 million to settle charges that the bank used customer funds to calculate Lehman Brothers' credit in the two years leading up to the financial crisis in the largest settlement related to a customer account violation, regulators said Wednesday.
The Commodity Futures Trading Commission sued JPMorgan for counting customer funds held in an account at the bank along with Lehman's assets in determining how much credit to extend to Lehman, a violation of federal law.
"As should be crystal clear, these laws must be strictly observed at all times whether the markets are calm or in crisis," CFTC Enforcement Director David Meister said.
JPMorgan neither confirmed nor denied the charges in the settlement.
The CFTC also alleged that JPMorgan held onto the customer money, about $333 million, for two weeks after Lehman failed, only agreeing to release the funds on Sept. 30, 2008. Futures regulations regarding customer money dictate that the money should be accessible to customers at any time and shouldn't be considered the firm's assets.
The treatment of futures customers' money was thrown into the spotlight when the failure of MF Global failed last fall revealed an approximately $1.6 billion shortfall in customer money that still isn't entirely accounted for. The CFTC, along with the FBI and federal prosecutors, is investigating the MF Global case, but no charges have been filed.
In the JPMorgan case, the CFTC said that JPMorgan used the customer accounts to calculate Lehman's credit for intraday lending purposes for 22 months from November 2006 to September 2008 when Lehman failed. During that time Lehman held between $250 million and $1 billion in customer money at JPMorgan.