Having your company's name mentioned in the same sentence with Bernie Madoff probably isn't going to be good for business. But that's the situation now facing one of America's largest banks, JPMorgan Chase.

A lawsuit unsealed in New York last week claims that while Madoff was running his Ponzi scheme, taking in billions of dollars, Chase was "at the very center" of the fraud and was "thoroughly complicit" in it.

According to the complaint, JPMorgan Chase had reason to look the other way. It claims the bank earned a half-billion dollars in its relationship with Madoff -- money that ultimately came from the pocket's of Madoff's victims. It further claims many of the bank's executives strongly suspected Madoff's enterprise was fraudulent, but said nothing.

The suit was filed in December by Irving Picard, a bankruptcy trustee for Madoff's victims, who is trying to reclaim as much money as possible. The suit was sealed at the bank's request. In a separate suit, Picard accused New York Mets owner Fred Wilpon was involved in financial dealings with Madoff and knew about his scheme.

Speculation about a Ponzi scheme

Among the documents contained in the complaint against Chase is an internal document from JPMorgan Chase's Hedge Fund Underwriting Committee. It quotes one member of the committee saying that Madoff's returns looked suspicious. The member even said that there was speculation within the bank itself that Madoff could be part of a Ponzi scheme.

Madoff, a highly respected and longtime Wall Street player, was arrested in December 2008 and charged with running a $50 billion Ponzi scheme. Madoff, a former chairman of the Nasdaq Stock Market, deceived wealthy investors who thought they were reliably earning two percent or more per month on their money even when financial markets were performing poorly.

The 73-year old Madoff is currently serving a 150-year prison sentence.


Meanwhile, JPMorgan Chase issued a statement, calling the complaint "meritless" and based on distortions.

"Contrary to the trustee's allegations, JPMorgan did not know about or in any way become a party to the fraud orchestrated by Bernard Madoff," the company said in a statement. "Madoff's firm was not an important or significant customer in the context of JPMorgan's commercial banking business, and the revenues earned from Madoff's bank account were modest and entirely consistent with conventional market rates and fees."