Lehman Brothers Holdings went bankrupt in 2008, sparking global financial issues and making discussions about banking practices a household affair for months. Since that time, Lehman Brothers has filed suit against JPMorgan, alleging that the bank took certain actions in the days leading up to the bankruptcy that caused Lehman Brothers to lose critical liquidity. That loss of liquidity hurt other Lehman Brothers creditors; allegations are that JPMorgan gained a “windfall” while other creditors lost out.
JPMorgan previously agreed to make payments of $1.42 billion to settle some creditor claims in the Lehman Brothers bankruptcy. Reuters is reporting that the bank is now agreeing to pay another $797.5 million to end all of the related litigation and settle the matter. While over $2 billion is a lot of money, it’s only a fraction of the original $8.6 billion lawsuit filed against JPMorgan.
While the issues in this case are complex, they do include the fact that JPMorgan is accused of benefiting from Lehman funds just before Lehman filed bankruptcy. Specifically, Lehman and its other creditors say that JPMorgan used its position as Lehman’s largest secured creditor and main clearing bank to siphon away money right before the bankruptcy was filed. These are obviously enormous banks and financial institutions, but the lesson applies to any business. In the midst of financial struggles that might lead to bankruptcy, you can’t move money to hide it and you can’t make sudden large payments to one or two creditors and leave others holding the bag.
If you’re dealing with business matters and finances are getting difficult — or you believe someone has shorted you in a business transaction in any way — consider getting legal advice before you take your next steps. Taking the right legal path can help you avoid expensive litigation in the future and protect your financial interests now.
Source: Business Insider, “JPMorgan to pay Lehman $797.5 million to end litigation over collapse,” Jonathan Stempel, Feb. 01, 2017