JPMorgan Chase & Co and UBS AG , emboldened by a favorable court ruling, urged a federal judge to throw out many claims by the bankruptcy trustee seeking billions of dollars for victims of Bernard Madoff's Ponzi scheme.

Banks are taking the offensive after U.S. District Judge Jed Rakoff in Manhattan, in a case against HSBC Holdings Plc and others, last Thursday said trustee Irving Picard exceeded his power in suing third parties on behalf of former customers of Bernard L. Madoff Investment Securities LLC (BLMIS).

Picard sued JPMorgan for $19.9 billion and UBS for $2 billion. The cases are among the largest of the roughly 1,050 lawsuits seeking more than $103 billion that Picard has filed since Madoff's firm collapsed on December 11, 2008.

Many defendants have challenged Picard's authority to sue, or claimed that they are victims and should not pay anything.

In rejecting Picard's convoluted theories, Rakoff took away $8.6 billion of the trustee's claims against HSBC, Italy's UniCredit SpA and other defendants.

JPMorgan and UBS asked U.S. District Judge Colleen McMahon, who handles their cases and sits on the same court as Rakoff, to accept her colleague's conclusion that Picard lacks standing to claim they violated duties to Madoff customers by failing to stop the fraud.

The JPMorgan lawsuit is an illegitimate attempt by the trustee to usurp and assert thousands of state law securities claims that belong not to BLMIS but exclusively to its customers, that bank said in a Monday evening court filing.

UBS in a separate filing endorsed JPMorgan's arguments, saying Rakoff's decision should apply to Picard's nearly identical common law claims against other banks.

JPMorgan also asked McMahon to throw out 12 of Picard's bankruptcy claims, as well as eight common law claims.

Amanda Remus, a spokeswoman for Picard, said that the banks' filings were expected, and that the trustee will respond. JPMorgan declined to comment. UBS did not immediately respond to a request for comment.


The bulk of Picard's cases are clawback lawsuits against former Madoff customers who Picard believes took too much cash out of the firm before its collapse.

In contrast, the lawsuits against JPMorgan, UBS, HSBC, UniCredit and feeder funds that steered client money to Madoff accuse the defendants of ignoring red flags of Madoff's fraud, often to win more fees or commissions.

Such claims are part of Picard's lawsuits against JPMorgan and UBS, and both banks have forcefully rejected them.

In its filing, JPMorgan said Picard failed to show anyone at the bank had actual knowledge of Madoff's crimes, or to substantiate his utterly implausible theory that JPMorgan deliberately collaborated with Madoff in perpetuating a Ponzi scheme in order to earn routine banking fees.

The trustee has said he has recovered $8.6 billion to cover roughly $17.3 billion of valid customer claims. Madoff, 73, is serving a 150-year prison sentence.

The cases are Picard v. JPMorgan Chase & Co et al, U.S. District Court, Southern District of New York, No. 11-00913; and Picard v. UBS AG et al in the same court, No. 11-04212.

(Reporting by Jonathan Stempel, editing by Dave Zimmerman and Gerald E. McCormick)