A federal appeals court dismissed a lawsuit seeking to hold JPMorgan Chase & Co responsible for services allegedly provided by the former Washington Mutual Inc to advance a Ponzi scheme at Caribbean-based Millennium Bank.

The 9th U.S. Circuit Court of Appeals said on Tuesday that investors who bought fraudulent certificates of deposit from Millennium did not pursue all remedies with the Federal Deposit Insurance Corporation (FDIC) as required by federal law or show that JPMorgan did anything to advance the alleged fraud.

The decision by a three-judge panel upheld an October 2010 lower court ruling. Niall McCarthy, a lawyer for the investors, was not immediately available for comment.

Washington Mutual was seized on September 25, 2008 by the FDIC, which immediately sold the largest U.S. savings and loan's banking operations to JPMorgan for $1.88 billion.

Last month, a San Francisco federal grand jury returned a 23-count indictment charging William Wise and Jacquline Hoegel with fraud and conspiracy over the sale of $129.5 million of CDs by their companies Millennium, United Trust of Switzerland and Sterling Bank and Trust, resulting in $75 million of losses.

Prosecutors alleged that Millennium, United Trust and Sterling had promised CD investors high rates of return, sometimes over 16 percent, based on overseas investments, but that Wise and Hoegel used investors' funds to enrich themselves and pay off earlier investors.

Their activities were shut down in March 2009 when the U.S. Securities and Exchange Commission filed related civil fraud charges.

Wise, a Canadian lawyer, is believed to be in Canada and a warrant for his arrest has been issued, the U.S. Attorney's office in San Francisco said on Tuesday. Hoegel, a resident of American Canyon, California, was released on bond.

The CD investors sought to hold JPMorgan liable for Washington Mutual's having provided banking services to Millennium. These investors claimed that Washington Mutual knew about the fraud at Millennium, which was based in St. Vincent and the Grenadines, while it was providing these services.

But the appeals court said the investors did not fully present their claims to the FDIC before suing the purchaser, in this case, JPMorgan, of a failed bank.

It added that investors did not show a single specific wrongful act by JPMorgan, relying instead on assertions that the bank's general practices caused their losses.

The plaintiffs' conclusory allegations regarding JPMorgan fall short, Judge Carlos Lucero wrote for the appeals court.

The case is Benson et al v. JPMorgan Chase Bank NA, 9th U.S. Circuit Court of Appeals, Nos. 10-17402 and 10-17404.

(Reporting By Jonathan Stempel)