A federal judge has dismissed JPMorgan Chase & Co.’s bid to avoid arbitration in a dispute involving the theft of funds from an elderly client, reports Advisor Hub.
In October 2024, 85-year-old Susan Kraus filed a claim with the Financial Industry Regulatory Authority over her contention that her son, Brett Graham, stole over $8 million from her JPMorgan bank accounts after the death of her husband in 2017. The claim accuses JPMorgan of failing to protect her from the theft and also names several other financial institutions.
After FINRA decided that Kraus’s case should be heard in arbitration, JPMorgan sued Kraus in an attempt to prevent the matter from being pursued in that forum. But the bank’s bid was denied recently by US District Judge Jesse Furman, who said it should be up to the arbitrators to determine where Kraus’s claims should be heard.
JPMorgan had contended that the matter should be decided in court or by an arbitration panel not affiliated with FINRA. The bank asserted that the matter involves checking and savings accounts that are not under the jurisdiction of FINRA, and that Kraus was not actually a customer of JPMorgan Securities.
But Judge Furman noted that JPMorgan could have immediately taken the case to court and refused arbitration. Instead its request to throw out the FINRA arbitration proceeding was denied. “Having made that choice (not to mention, having already submitted the question to the FINRA arbitrators and lost), JPMS may not now obtain relief from a court,” the judge said.
Kraus’ lawyer, Jenice Malecki, emphasized the lack of adequate protections by financial firms for elderly clients whose investments may be at risk.
“Money laundering and wire fraud happen at financial institutions, and we have alleged these financial institutions either don’t have appropriate policies in place or didn’t follow them to protect a senior in need,” said Malecki.
A spokesperson for JPMorgan had no immediate comment on the decision.
Brett Graham allegedly started transferring money from Kraus’ accounts into his own checking account in 2019. According to prosecutors, Graham told the woman’s financial advisor he was making investments on her behalf and paying for medical care, but instead he was using the money for himself and others, including purchases of art and jewelry.
As part of a plea deal in May, Graham pleaded guilty to wire fraud. He will be sentenced in September and faces up to 20 years in prison.
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