JPMorgan Chase (NYSE: JPM) has found itself in quite a pickle given its association with Bernard Madoff, the jailed king of Ponzi Schemes. Recall that Irving Picard, the trustee who is tracking down assets to pay off victims, has accused the bank of aiding and abetting Madoff by turning the other way. Picard is convinced JPMorgan is at the epicenter of the fraud and is seeking $6.4 billion.

One big issue is how much the bank actually made from the Madoff accounts. One answer comes from Linus Wilson, a finance professor at University of Louisiana at Lafayette, who makes use of newly released data and different methods of calculation than previous studies. "Wilson's paper looks at total Madoff-linked account balances at JPMorgan Chase from 1986 to 2008, a longer period than earlier studies, which may have underestimated JPMorgan's profits. The total figure Wilson arrives at is $907 million," notes CNBC.

"That figure assumes JPMorgan's reinvestment of Madoff client money, and the generation of a similar rate to that of other funds invested by the bank during a similar time period. But even without any reinvestment at all, Wilson finds that JPMorgan's pre-tax profits from Madoff money would have amounted to an estimated $398 million."

Wilson also believes that observers should have known something was amiss, as Madoff never provided third-party verification of trades and the steady returns were plainly implausible. I still think the bank will seek a settlement. But we'll see how much Picard is willing to give.

For more:
- here's the article
- here's the study

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