JP Morgan has to pay over $50 million for breaching contract
The investment bank giant JP Morgan has been told to pay Russian billionaire Leonard Blavatnik more than $50 million for placing risky subprime mortgage securities in an investment account he held.
The claim against the bank was made just after the U.S. subprime mortgage market collapsed.
According to New York judge Melvin Schweitzer, JP Morgan had breached the contract made between the bank and Mr. Blavatnik.
Mr. Blavatnik claims that JP Morgan Investment Management assured him that his money would only be invested conservatively.
The Russian business magnet claimed that JP Morgan continued to hold the securities in his portfolio even though they knew they were incredibly risky. However, the judge rejected his claim for negligence, because at the time the investments were made, mortgage securities were considered “relatively safe and desirable”.
On Monday, the judge ruled that JP Morgan must pay $42.5 million in damages plus interest at 5 percent per annum from 2008.
Mr Blavatnik said in a statement that people who have been wronged by investment banks should stand up for themselves:
“There are a lot of people out there who, I understand, feel they have been wronged by JP Morgan but cannot afford to take on a huge bank. They shouldn’t have to.”
Spokesman for JP Morgan, Doug Morris said the company is glad to hear the judge rejected any negligence claims:
“We are pleased that the court rejected CMMF’s negligence claims, and found that our investment professionals lived up to their responsibilities. We respectfully disagree with the court’s interpretation of our agreement with CMMF, and we are considering our options regarding that finding.”
The ruling comes following other lawsuits made against the bank. In July JP Morgan agreed to pay $410 million to settle charges from the Federal Energy Regulatory Commission (FERC) for manipulating energy markets.