An ex-JPMorgan private banker is fighting FBI allegations that he embezzled $1.6 million from client accounts and then blew most of it on stock trades.
Kevin Chiu, a former business relationship manager and private client banker who had worked at a pair of JPMorgan offices in Brooklyn, pleaded not guilty in federal court in New York on Wednesday to charges of fraud, embezzlement, money laundering and identity theft.
The FBI alleges he sent most of the embezzled funds to a brokerage account held by his mother at another institution, which is unnamed in the court documents. According to the complaint, he used that account to buy shares of electrical vehicle maker Tesla and other stocks and ended up losing most of his investments.
The FBI says Chiu admitted to the alleged misdeeds in an interview with JPMorgan employees on July 6, 2022. The bank, according to the complaint, fired him eight days later and compensated the affected clients.
A JPMorgan spokesperson declined to comment. Attempts to reach the lawyers listed in the court record as representing Chiu were unsuccessful.
Unlike typical bankers, employees in JPMorgan's private bank provide services extending to everything from financial planning and investing to philanthropy and family office management. Private banks typically cater to the affluent or very affluent, many requiring clients to have a minimum of $1 million in investable assets.
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Chiu's alleged misdeeds were uncovered in July 2022 when a client — a 74-year-old woman — entered one of the Brooklyn offices and presented some dubious paperwork to a manager. The client explained, according to the criminal complaint, that she maintained residences in both Brooklyn and Israel and that she had asked Chiu not to send statements to her Israeli home since she preferred to come into his office to discuss them in person.
The client said the bank had sent her a statement in Israel anyway, one showing that she had only $13,000 in her account. A statement separately provided by Chiu had put the figure at $900,000, according to the complaint.
Sam Edwards, a securities lawyer at Houston-based Shepherd Smith Edwards & Kantas and a former president of the Public Investor Advocates Bar Association, said it's somewhat surprising how unsophisticated the alleged scam was. In this case, he said, it's a good thing that JPMorgan made the "mistake" of sending the client's statement to her residence in Israel. Otherwise, Chiu's alleged misdeeds would not have been uncovered.
"Thank goodness she then brought it in to the bank," Edwards said. "Because I can tell you, in my experience, there are a lot of times when something like this happened and there was some evidence of wrongdoing, and there is a fundamental question of, 'How did you not know something as wrong?'"
JPMorgan opened an internal investigation, according to the complaint, and found that Chiu had been transferring the client's money into the brokerage account held in his mother's name. The complaint alleges inspectors later found that Chiu had been making similar transfers out of five other client accounts, either to embezzle the money or cover his tracks.
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Chiu is also accused of taking some of the money he had put into the brokerage account and eventually moving into a separate bank account belonging to his mother. He then, according to the complaint, would use the electronic payment service Zelle to transfer it to his own account. The FBI alleges he also sent some of the money to his girlfriend.
All told, Chiu is accused of transferring $2.4 million out of client accounts, in part to cover the $1.6 million in losses. He carried out the fraud, states the complaint, in part by persuading his 74-year-old client to fill out blank transaction forms. He also completed some of the transfers using the bank account and routing numbers of at least three clients, states the complaint.
