The U.S. Commodity Futures Trading Commission is expected to file a civil case against JPMorgan, for actions linked Lehman Brothers at the height of 2008 financial crisis.
The bank is expected to settle the Lehman matter and pay a fine of approximately $20 million. While the penalty is significant for the agency, the sum is little more than a rounding error for a bank as large as JPMorgan.
This move will be the first federal enforcement case to stem from Lehman’s downfall.
The trading commission is expected to accuse JPMorgan of overextending credit to Lehman for two years leading up to its bankruptcy in 2008, the people briefed on the matter said.
JPMorgan extended the credit using an inaccurate evaluation of Lehman’s worth, improperly counting Lehman’s customer money as belonging to the firm. Under federal law, firms are not allowed to use customer money to secure or extend credit.
The agency is also set to accuse JPMorgan of withholding separate Lehman customer funds for nearly two weeks, rather than turning them over to authorities, the people said. In the course of resolving that matter, regulators became aware of JPMorgan’s questionable credit to Lehman, one of the people briefed on the matter said, New York Times reported.
JPMorgan declined to comment. The bank is expected to neither admit nor deny wrongdoing as part of the settlement.