JP Morgan Suspected Madoff Months Prior to Arrest, Kept Doing Business With Him

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The bank "quietly liquidated its entire $250 million cash position" with a fund that had invested with Madoff while continuing to provide fee-generating services to Madoff's business, according to the complaint.

The suit also alleged that Chase should have been suspicious of fraud because of the activity in Madoff's personal checking account. The account was supposed to hold the assets of investors, but by fall of 2008 had dropped from millions to close to zero.

In July 2010, however, a federal judge in New York threw out the MSLMK suit.

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"While it might have been possible for defendants to determine that Madoff was committing fraud from the 'red flags' that plaintiff points out, plaintiff alleges no facts to demonstrate that defendants actually did make such a discovery," Judge Barbara Jones wrote in her opinion.

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