JPMorgan Wins in $8.6 Billion Legal Battle against Lehman

by San Antonio Attorney

A federal judge ruled in favor of J.P. Morgan & Co. in its $8.6 billion legal battle with Lehman Brothers Holdings Inc.’s.  The bankrupt investment bank accused J.P. Morgan of unlawfully siphoning money worth billions of dollars before the bankruptcy filing.

According to New York federal judge Richard Sullivan, J.P. Morgan did not take advantage of its power as Lehman’s main clearing bank to pressure the investment bank to give additional collateral before the great September 2008 recession.

Judge Sullivan rejected Lehman’s primary assumption that J.P. Morgan was bound to extend loan to Lehman as part of their agreement.

Lehman filed a lawsuit against J.P. Morgan over five years ago, claiming that J.P. Morgan was involved in voracious money grabs to generate an $8.6 billion “slush fund” prior to the company’s collapse.

Since J.P. Morgan was the clearing bank, it provided cash advances of about $100 billion per day to Lehman as assistance in immediate repurchase deals.  That function ended in J.P. Morgan being one of the failed investment banks major adversaries in several disputes involving Lehman’s decline and also one of its largest creditors.

Lehman was one of the biggest investment banks in the United States.  Its bankruptcy filing in September 2008 sent markets into chaos and contributed to the global financial crisis.

The legal battle with J.P. Morgan is one of the ongoing orders of business for Lehman, which formally exited from Chapter 11 protection in 2012.  But considering its billions of dollars in outstanding assets and larger money to repay creditors, and also a lawsuit with J.P. Morgan and others, Lehman will likely continue to exist for many years.

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