JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and three other banks helped to push Thornburg Mortgage Inc. into a “free-fall” bankruptcy, the insolvent firm’s trustee said in a lawsuit seeking to recover $2 billion for creditors.
After making “unjustified” margin calls, the banks extracted more than $700 million of margin and interest payments from Thornburg, then sold their collateral and left the company to file for Chapter 11 protection during the credit crisis in May 2009, trustee Joel Sher said in an April 30 filing in U.S. Bankruptcy Court in Baltimore.
Sher, who is liquidating the firm, now called TMST Inc., accused the banks of using “market disruption as a justification to initiate a collusive scheme to take control of the debtors and eventually drive them into bankruptcy.”
“We believe the suit is without merit,” Danielle Romero- Apsilos, a Citigroup spokeswoman, said in an e-mail. Joseph Evangelisti, a JPMorgan spokesman, declined to comment.
Banks are sometimes targeted by bankrupt companies that are trying to recover money for creditors. Lehman Brothers Holdings Inc. (LEHMQ) sued JPMorgan for $8.6 billion, saying the bank helped to cause its downfall. The trustee liquidating Bernard Madoff’s defunct firm is demanding $6.4 billion from the bank, accusing it of assisting Madoff’s Ponzi scheme. JPMorgan is fighting both lawsuits. |
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