JPMorgan to pay $150 million over failed Sigma SIV

NEW YORK , Tue Mar 20, 2012 – JPMorgan Chase & Co. agreed to pay $150 million to settle a lawsuit by pension funds and other investors accusing the largest U.S. bank of imprudently investing their cash in a risky debt vehicle that collapsed in 2008.

The settlement with investors including the American Federation of Television and Radio Artists Retirement Fund was disclosed in filings late Friday with the U.S. District Court in Manhattan.

It related to the collapse of Sigma Finance Corp, a $27 billion investment fund created by London-based Gordian Knot Ltd. Sigma failed in October 2008 at the height of the global financial crisis.

According to the complaint and a regulatory filing, JPMorgan invested cash collateral posted by participants in a securities lending program in about $500 million of medium-term notes issued by Sigma Finance Inc, a structured investment vehicle.

While Sigma once carried “triple-A” ratings, JPMorgan “buried its head in the sand and refused to heed the warning signs” as analysts began predicting by late 2007 that Sigma would be unable to repay the notes, the complaint said.

Sigma’s failure left about $1.9 billion as security for roughly $6.2 billion of medium-term notes and other secured debt, the complaint said.