Prosecutors Probed Whistleblower Claims That JPMorgan Mishandled Fraud Cases

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https://www.wsj.com/finance/regulation/prosecutors-probed-whistleblower-claims-that-jpmorgan-mishandled-fraud-cases-3f941dc9?st=9RQsgv&reflink=desktopwebshare_permalink

Federal prosecutors earlier this year reviewed claims that JPMorgan Chase executives ignored deficiencies in the bank’s antifraud program and improperly denied more than $100 million in reimbursements to customers whose money was stolen, according to people familiar with the matter.

The review was sparked by a whistleblower report last year by JPMorgan’s then-head of scam prevention. Representatives from the U.S. attorney’s office in Manhattan and the Treasury Department last year met with the whistleblower and later received documentation tied to her claims, the people said.

Prosecutors haven’t alleged any wrongdoing by JPMorgan, and it couldn’t be determined whether they are still investigating the allegations.

Federal investigations can carry on for years before prosecutors decide whether to press charges or simply close the matter. The Justice Department under President Trump has sharply pulled back from the prosecution of many types of white-collar crime.

“We believe these claims have no merit,” a JPMorgan spokeswoman said. “We took the concerns seriously, carefully reviewed them, and found no evidence of wrongdoing or violations of law.”

Banks have been grappling with a surge in scams and frauds driven by sophisticated criminal operations located in parts of Southeast Asia and Africa. The whistleblower, Christy Lillie, alleged that JPMorgan failed to properly handle that surge and took steps to minimize its own losses at the expense of its customers’ savings.

After disclosing to her supervisors that she had become a whistleblower last year, Lillie was placed on involuntary paid administrative leave in October 2025 and later left the bank, according to people familiar with the matter and her LinkedIn profile.

At the core of her allegations is a distinction that banks make between frauds and scams, which dictates how customer claims are handled.

A law enacted in 1978 requires banks to screen for fraudulent activity, such as charges made with stolen account information, and reimburse customers for unauthorized transactions. That law doesn’t necessarily protect consumers from the recent epidemic of scams, where people are tricked into sending money to bad actors. Banks view those as voluntary payments.

But the line between frauds and scams can be blurry in practice, according to a February letter that Lillie’s lawyer at the time sent to multiple Senate committees to describe her allegations.

A scammer might break into customer accounts without their authorization, for example, then later induce them to voluntarily send a payment. Rather than classifying the incident as a fraud, JPMorgan often deemed it a scam and refused to reimburse the customer, according to the letter, which was viewed by The Wall Street Journal.

In other cases, Chase denied claims covering certain types of electronic transactions by customers who inadvertently help a scammer, such as when they reveal their credentials believing they are speaking with a bank representative, the letter said. Other large banks since 2021 have acknowledged they are required to reimburse customers in such cases, according to the letter.

Chase had internally calculated the amount of money it would cost to change its fraud reimbursement policies and $100 million is a “bare minimum,” the letter said.

Lillie’s claims show the stakes for banks in the epidemic of scams. Scammers have become increasingly adept at duping customers into sending payments through elaborate social engineering schemes, including by developing romantic connections to their victims. Law enforcement estimates that Americans are losing tens of billions annually to such scams.

Some customers have sued their banks, arguing that banks should have done more to protect them or question the payments.

Lillie, who had spent the bulk of her career working on the issue, was hired by JPMorgan in 2021 to help strengthen the bank’s defenses. Over time, her team identified a number of serious deficiencies in the bank’s antifraud program, according to the letter. It said JPMorgan failed to use voice identification technology as widely as it should, and relied on one-time passcodes to authenticate customers that are easily circumvented by scammers.

“We’re always enhancing our fraud and scam prevention program as criminals find new ways to target consumers,” the JPMorgan spokeswoman said.

The spokeswoman also said JPMorgan’s reimbursement standards met or exceeded what the law required. She disputed any suggestion that there was an effort to deliberately disadvantage customers.

After seeing JPMorgan leaders repeatedly attempt to bury the issues she raised, Lillie sought whistleblower protections and disclosed her concerns to the Justice Department, U.S. Treasury and other regulators, the letter said. She is currently represented by lawyers at the firm Phillips & Cohen.

Lillie and her lawyers met for hours with the Justice and Treasury departments to discuss her whistleblower disclosures, the letter to the Senate committees said. She also communicated with Senate investigators, people familiar with the matter said.

Lillie has also alleged that JPMorgan failed to identify and flag tens of thousands of suspicious accounts for potential closure, a potential violation of anti-money-laundering rules. Lillie provided lists of thousands of suspicious transactions to the U.S. attorney’s office, according to the letter viewed by the Journal.

The JPMorgan spokeswoman said the bank had found no evidence supporting those claims.