Dimon, JPMorgan Deny Board Failed in Zelle Fraud Claims Response

Directors at JPMorgan Chase & Co. rejected claims that they ignored alleged fraud on the Zelle money-transfer platform, arguing Wednesday before the Delaware Court of Chancery that there’s no evidence they violated federal regulations governing electronic transfers.

Anecdotes about Chase Bank customers not being reimbursed for unauthorized electronic transfers don’t meet the legal standards for successful oversight claims, said Audra Soloway, who represents most of the JPMorgan directors. Soloway of Paul, Weiss, Rifkind, Wharton & Garrison LLP said the lawsuit, brought by investors, should be dismissed.

JPMorgan and CEO Jamie Dimon joined the other directors in their motion to dismiss.

Instead of pointing to damages suffered by JPMorgan, the complaint speculates about potential fines or penalties that could arise if the company was found to have failed to respond to any fraud, she said.

“None of these anecdotes is sufficient to show there’s violations of” the Electronic Funds Transfer Act and its implementing regulation, “much less widespread violations,” she said.

Representing the investors behind the litigation, Mark Billion of Billion Law said that JPMorgan hasn’t provided any documentation to show that it met deadlines for investigating and reimbursing claims of fraud stemming from unauthorized Zelle transfers.

“I haven’t heard anyone say, ‘We’re actually compliant with these deadlines,’” he said.

With no evidence indicating JPMorgan’s adherence to deadlines and other requirements under the federal statute, “I think there’s a reasonable inference that all might not be well,” he said.

The court’s chief judge, Chancellor Kathaleen St. Jude McCormick, adjourned the brief hearing in Wilmington, Del., without ruling.

Dimon and JPMorgan are represented by Potter Anderson & Corroon LLP. The other directors are represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP. The investor is represented by Billion Law.

The case is IMG Holding LLC v. Dimon, Del. Ch., No. 2023-0522, oral arguments 1/31/24.