JPMorgan begins suing clients over 'endless financial imbalance'

JPMorgan Chase The company began suing customers who stole thousands of dollars from ATMs by taking advantage of a technical glitch that allowed them to withdraw money before the check bounced.

The bank on Monday filed lawsuits in at least three federal courts, targeting some of the people who withdrew the highest amounts in the so-called infinite money glitch that spread on TikTok and other social media platforms in late August.

A case in Houston involves a man who owes JPMorgan $290,939.47 after an unidentified associate deposited a counterfeit check for $335,000 at an ATM, according to the bank.

“On August 29, 2024, a masked man deposited a check into the defendant’s bank account at Chase in the amount of $335,000,” the bank said in the Texas filing. “After depositing the check, the defendant began withdrawing the vast majority of the illegally acquired funds.”

JPMorgan, the largest US bank by assets, is investigating thousands of potential cases related to “endless financial disorder”, although it has not disclosed the scope of the losses associated with it. Although the use of paper checks has declined as digital forms of payment gain popularity, they remain a major vehicle for fraud, resulting in $26.6 billion in losses globally last year, according to Nasdaq's Global Financial Crimes Report.

The endless cycle of financial dysfunction highlights the risk of social media amplifying discovered vulnerabilities in a financial institution. Videos began circulating in late August showing people celebrating by withdrawing cash from Chase ATMs shortly after depositing bad checks.

Typically, banks only provide a small portion of the check's value until it clears, which takes several days. JP Morgan says it closed the vulnerability a few days after it was discovered.

Other lawsuits filed Monday are in courts including Miami and the Central District of California, and involve cases where JPMorgan says customers owe the bank amounts ranging from about $80,000 to $141,000.

Most of the cases the bank is examining are for much smaller amounts, according to people familiar with the situation who declined to be identified when speaking about the internal investigation.

In each case, JPMorgan says its security team contacted the alleged fraudster, but the phony checks were not paid to him, in violation of the deposit agreement that customers sign when they create an account with the bank.

JPMorgan is seeking to recover the stolen funds along with interest and overdraft fees, as well as attorneys' fees and, in some cases, punitive damages, according to the complaints.

The lawsuits are likely just the beginning of a wave of lawsuits aimed at forcing customers to repay their debts and signaling broadly that the bank will not tolerate fraud, according to people familiar with the matter. They said JPMorgan prioritized cases with large dollar amounts and indications of possible ties to criminal groups.

Civil cases are separate from potential criminal investigations; JPMorgan says it has also referred cases to law enforcement officials across the country.

“Fraud is a crime that affects everyone and undermines confidence in the banking system,” Drew Pusateri, a JPMorgan spokesman, said in a statement to CNBC. “We are pursuing these cases and actively cooperating with law enforcement to ensure that if someone commits fraud against Chase and its customers, they are held accountable.”