Creditors of Lehman Brothers want a federal judge to look into why JPMorgan Chase & Co. "froze" billions of Lehman's assets in the days before Lehman's bankruptcy, saying it may have contributed to the investment bank's demise.
The committee representing unsecured creditors in Lehman's bankruptcy case wants to look at the books and to question officials of JPMorgan Chase, Lehman's largest secured creditor, about its decision to freeze Lehman's account.
"The creditors' committee understands that [Lehman] had at least $17 billion in excess assets which were held at [JPMorgan Chase] on the Friday going into the weekend before its bankruptcy filing," the creditors said in papers filed Thursday in U.S. Bankruptcy Court in Manhattan. JPMorgan Chase was the clearing firm for Lehman and is owed an estimated $23 billion from the collapsed investment bank. The committee says JPMorgan Chase, days before Lehman filed for bankruptcy, refused to let the investment bank access its assets, and instead froze its account. That decision, the creditors say, was to protect JPMorgan Chase, which was on the hook for billions of dollars in the event Lehman failed.
In freezing Lehman's assets, "JPMorgan Chase was purportedly holding all of" the investment bank's assets "as a potential offset against any claims JPMorgan Chase may have had" against Lehman, the creditors said.
A spokesman for JPMorgan Chase was not immediately available for comment. The creditors say JPMorgan Chase's actions resulted in Lehman's "immediate liquidity crisis that could have been averted by any number of events, none of which transpired." Lehman filed for bankruptcy Sept. 15.
