NEW DELHI (CoinChapter.com) — JP Morgan CEO Jamie Dimon has stated that he believes cryptocurrencies are nothing more than a decentralized Ponzi scheme.
Dimon shared his views in response to a question at the House Financial Services Committee hearing called “Holding Megabanks Accountable: Oversight of America’s Largest Consumer Facing Banks.“
The JP Morgan chief highlighted that blockchain, smart contracts, etc. are technologies that will benefit the financial sector. However, he seemed irked with cryptocurrencies, saying that it was astonishing that some people believe crypto tokens are good investments.
Furthermore, Dimon pointed out several cryptocurrency scams and frauds that saw losses of billions of dollars. However, the top executive remained positive about stablecoins once they are under proper regulatory oversight.
Dimon said that stablecoins should be treated like a money market fund. He also noted that his firm is a big user of blockchain technology, highlighting the JP Morgan coin.
However, before believing in Mr. Dimon’s take on cryptos, let’s view some of the more infamous financial offenses by JP Morgan.
1. Misleading Investors About Securities Containing Toxic Mortgages – 2013
Total Settlement- $13 billion
The Justice Department investigated JP Morgan concerning federal and state civil claims due to the “packaging, marketing, sale, and issuance of residential mortgage-backed securities” by JPMorgan, along with Bear Stearns and Washington Mutual.
Furthermore, JP Morgan acknowledged that it shared incorrect details with investors about RMBS transactions as part of the settlement. The then AG Eric Holder said that though JP Morgan was not the only firm to sell toxic loans to unsuspecting investors knowingly, that didn’t excuse the firm’s behavior.
Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown. The size and scope of this resolution should send a clear signal that the Justice Department’s financial fraud investigations are far from over.
Additionally, the settlement forced JP Morgan to provide relief to affected homeowners and potential homebuyers. The settlement, however, did not absolve the firm or its employees from facing criminal charges.
The sale of the questionable mortgage securities likely led to the mortgage market meltdown.
2. Connection With Bernard L. Madoff’s Multi-Billion Dollar Ponzi Scheme, 2014
Penalty- $1.7 billion
The Manhattan US Attorney And FBI Assistant Director-In-Charge filed criminal charges against JP Morgan Chase in connection with Bernard “Bernie” Madoff’s Ponzi schemes. In addition, the firm was charged with two violations of The Bank Secrecy Act.
At the time, the $1.7 billion penalty was the largest Bank Forfeiture and Department of Justice penalty for a Bank Secrecy Act violation. The settlement was part of a deal that saw the bank receive a deferred prosecution.
Madoff oversaw the largest Ponzi scheme in history, which resulted in thousands of investors losing billions of dollars at his New York City investment firm. As a result, the courts sentenced him to 150 years in prison.
Jamie Dimon believes cryptos are a “Ponzi scheme.”
Given the history of JP Morgan with the Madoff case, he is likely to know.
3. Spoofing and Manipulation, 2020
Penalty- $920.2 million
The Commodity Futures Trading Commission (CFTC) brought up JPMorgan Chase & Company and its subsidiaries, JPMorgan Chase Bank, NA, and J.P. Morgan Securities LLC, for manipulative and deceptive conduct and spoofing.
The charges stated that JP Morgan (and friends) made thousands of spoof orders in precious metals and US Treasury futures contracts on the New York Mercantile Exchange and the Chicago Board of Trade.
The landmark ruling was a multi-agency effort and marked a victory for the government’s efforts to stop illegal trading in the futures and precious metals market. The CFTC pointed out that JP Morgan manipulated the precious metals market and US treasury contracts between 2008 and 2016.
Traders would place orders in the market and not execute them, creating a false impression of buy or sell interest and manipulating prices. JP Morgan made some of these trades, the CFTC investigation revealed, using its own accounts.
So, when the CEO of JP Morgan alleges cryptos of being a scam or out to cheat investors, it would be wise to remember that the pot often calls out the kettle for being black.
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A Delhi-based Markets writer, I did my bachelor's in engineering with major in electronics and communications. I first heard of bitcoin while writing an article about blockchain technology a few years back, and have been following it ever since. Bitcoin may well be current big thing happening in the finance industry, and it feels like the right time to join the crypto bandwagon.