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The Madoff Victim Fund controlled by the U.S. Justice Department said that it will distribute $2.4 billion in forfeitures from the Jeffry Picower estate “as fast as possible” once all eligible recipients are known, Bloomberg News reported yesterday. The money is part of a $7.2 billion settlement by the widow of one of Bernard Madoff’s largest individual investors of a lawsuit accusing Picower of having known of the fraud, which robbed customers of about $17 billion in principal. A federal judge approved the settlement in March 2012 and the trustee liquidating Madoff’s bankrupt brokerage distributed his $5 billion share of the Picower money a year ago, when a former Madoff customer lost her legal bid to challenge her exclusion from the payout.

Two former JPMorgan Chase & Co. traders were indicted for engaging in a securities fraud to hide trading losses that eventually surpassed $6.2 billion on wrong-way derivatives bets last year, Bloomberg News reported yesterday. Javier Martin-Artajo, who oversaw trading strategy for the synthetic portfolio at the bank’s chief investment office in London, and Julien Grout, a trader who worked for him, were named in the indictment, unsealed yesterday in federal court in Manhattan. The U.S. announced preliminary charges against the men in August. Both were indicted by a grand jury on five counts, including securities fraud, conspiracy, filing false books and records, wire fraud and making false filings with the U.S. Securities and Exchange Commission. The pair, along with unidentified co-conspirators, are accused of engaging in a scheme to manipulate and inflate the value of position markings in the synthetic credit portfolio, or SCP. They face prison terms of up to 20 years if convicted of securities fraud, the most serious charge.

With federal prosecutors in Manhattan facing a December deadline to bring additional charges connected to Bernard L. Madoff’s multibillion-dollar Ponzi scheme, they are weighing criminal charges against several people connected to the case, the New York Times DealBook blog reported yesterday. Among those still under scrutiny are Shana Madoff Swanson, a niece of Bernard Madoff who was a senior executive at the firm, and Paul J. Konigsberg, a longtime accountant in Mr. Madoff’s inner circle. Investigators have examined several dozen people related to the case. Including Madoff, who is serving a 150-year prison sentence, nine have pleaded guilty. When Mr. Madoff confessed in December 2008, that started the clock ticking on a five-year statute of limitations to bring securities fraud charges. Any new charges would come just weeks before the first criminal trial related to the Madoff case. On Oct. 7, five former employees of Bernard L. Madoff Investment Securities are scheduled to stand trial in Federal District Court in Manhattan on charges they aided the fraud. Each of the five employees — Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O’Hara and George Perez — worked at the firm for more than 15 years.

Bankruptcy Judge Burton Lifland said that victims of Bernard Madoff's fraud are not entitled to interest or inflation adjustments on their claims, a decision that could speed the return of $1.36 billion to the swindler's former customers, Reuters reported yesterday. Judge Lifland ruled in favor of Irving Picard, the trustee liquidating Madoff's firm, in concluding that it would be unfair to award "time-based" damages to victims of the Ponzi scheme uncovered at Bernard L. Madoff Investment Securities LLC. Judge Lifland said that a contrary ruling would likely have "significant unintended consequences" by favoring investors who have recovered their principal over those who have not, and perhaps giving a "windfall" to traders of claims on potential recoveries from Madoff's estate who were never victims of the fraud.

JPMorgan Chase & Co.'s penalties for the "London whale" trading fiasco are expected to total $500 million to $600 million as part of a far-reaching settlement that could wrap up as soon as next month, the Wall Street Journal reported today. The Justice Department, Securities and Exchange Commission, Commodity Futures Trading Commission, Office of the Comptroller of the Currency and the U.K's Financial Conduct Authority are conducting investigations into J.P. Morgan's handling of the episode. Not all agencies have agreed to their final numbers and the total could still be above or below the range. U.S. and U.K. officials for months have been considering the possibility of such a "global" settlement, which would resolve all the probes at once. (Subscription required.)
http://online.wsj.com/article/SB100014241278873234071045790385028943022…

In related news, Javier Martin-Artajo, a former JPMorgan Chase employee accused of hiding trading losses that ultimately reached more than $6 billion, had his first day in court yesterday as he surrendered to Spanish authorities and kicked off what could be a lengthy extradition process, the New York Times DealBook blog reported yesterday. Martin-Artajo, a Spaniard who worked in the bank’s London office, was released soon after his surrender and arrest. He agreed to remain at the disposal of the Spanish judiciary, but it was unclear whether his passport was confiscated to prevent him from leaving the country. The criminal charges stem from a risky bet at JPMorgan’s chief investment office in London, where Martin-Artajo worked.
http://dealbook.nytimes.com/2013/08/27/spanish-authorities-arrest-forme…

A former Missouri bank executive pleaded guilty on Monday to misleading the government over the use of federal bailout funds to purchase a Florida vacation home, the Wall Street Journal reported today. Federal prosecutors said that Darryl Layne Woods, former chairman and majority shareholder of Calvert Financial Corp., admitted that he spent $381,487 on a luxury condominium in Fort Myers, Fla., just days after the bank received $1.04 million in emergency rescue funds through the $700 billion Troubled Asset Relief Program, according to a statement released yesterday by the special inspector general for TARP. When asked by federal watchdogs how the bank used the taxpayer dollars, he failed to disclose the condo purchase.

Bankruptcy Judge Paul G. Hyman said a major feeder fund to convicted Ponzi-scheme operator Tom Petters may move forward with a lawsuit to collect more than $4 billion in damages from General Electric Capital Corp., Dow Jones Daily Bankruptcy Review reported today. Judge Hyman on Friday ruled that Palm Beach Finance Partners LP may pursue a lawsuit accusing General Electric Capital Corp., of conspiracy to commit fraud.

Donald Trump was sued by New York Attorney General Eric Schneiderman over claims the billionaire operated a fraudulent online educational institute that swindled students out of $40 million, Bloomberg News reported yesterday. Trump University, now known as the Trump Entrepreneur Initiative, operated as an unlicensed educational institution and misled students with promises that they would gain real estate investing expertise, according to a copy of the petition provided by Schneiderman’s office. Students paid as much as $35,000 for the institute’s programs, purportedly taught by experts “handpicked” by Trump, according to the petition. Trump didn’t select the instructors, many of whom didn’t have real estate backgrounds or had recently sought bankruptcy because of their real estate investing failures, Schneiderman’s office alleged.

A federal judge has endorsed a broad interpretation of a savings-and-loan era law that the Justice Department is trying to use in cases against Wall Street banks, Reuters reported yesterday. U.S. District Judge Jed Rakoff said Monday that a "straightforward application of the plain words" of the Financial Institutional Reform, Recovery and Enforcement Act allowed the interpretation sought by the government. Rarely asserted until recently, it has become the basis of three lawsuits by lawyers under Manhattan U.S. Attorney Preet Bharara against banks. The latest decision came in a case that the Justice Department brought last October against Bank of America over toxic mortgages that its Countrywide Financial mortgage unit sold to Fannie Mae and Freddie Mac in the financial crisis. The government's case, which is set for trial on Sept. 23, focuses on a program instituted in 2007 by Countrywide called "High Speed Swim Lane." The government contends that the program speeded up some home loan processing by removing quality checkpoints, resulting in thousands of fraudulent and defective mortgages being sold to Fannie and Freddie. Rakoff issued a brief order in May dismissing some claims but largely allowing the case to move forward. His ruling on Monday explained his reasoning, particularly why the government could proceed with claims brought under a law adopted in the wake of the savings and loan scandals of the 1980s.The case is U.S. ex rel. O'Donnell v. Bank of America Corp., et al., U.S. District Court, Southern District of New York, No. 12-01422.

Hedge-fund manager Philip Falcone admitted wrongdoing as part of a civil settlement with securities regulators, a landmark in the government's new drive to push defendants to acknowledge their bad behavior, The Wall Street Journal reported yesterday. As part of the settlement, disclosed Monday, Falcone and his hedge-fund firm, Harbinger Capital Partners, will pay more than $18 million and Falcone will be banned from the securities industry for at least five years. Monday's civil settlement marks the first time that an individual or firm has made such an admission in a deal with the Securities and Exchange Commission (SEC), except in cases where they had previously pleaded guilty in a criminal proceeding or been criminally convicted. The settlement was the resolution of two civil lawsuits filed by the SEC against Falcone and Harbinger last year. The suits alleged, in part, that they had duped investors about a $113 million personal loan that Falcone took out from a Harbinger fund to pay his own taxes, even as other investors in the fund were prevented from pulling their money.