JPMorgan hit with second class action over cash sweep program

JPMorgan cash sweep class action lawsuit overview:

• Who: Plaintiff Jamie Canales filed a class action lawsuit against JPMorgan Chase & Co. and JPMorgan Securities LLC.
• Why: The JPMorgan defendants allegedly swept customers’ uninvested cash into their affiliates’ bank accounts with extremely low interest rates.
• Where: The JPMorgan class action lawsuit was filed in California federal court.

Another investor has filed a class action lawsuit claiming that JPMorgan’s cash sweep program unfairly benefits the bank by investing customers’ swept cash into Chase Bank accounts with low interest rates.

Plaintiff Jamie Canales says in the JPMorgan class action lawsuit that he had an investment account that was enrolled in the JPMorgan cash sweep program, in which his uninvested funds were automatically transferred into an interest-bearing bank account.

“From 2018 through March 2019, and again from March 2022 onwards, when the Federal Reserve began raising the target federal funds rate, the reasonable value of swept cash consistently exceeded the amounts paid by defendants on sweep accounts,” the lawsuit says.

JPMorgan class action: Swept cash provides kickback to bank’s affiliates

Canales alleges JPMorgan swept customers’ uninvested cash into accounts at its affiliated JPMorgan Chase Bank, which paid far below the market rates of interest, causing customers to earn less money than they would have earned had JPMorgan swept cash into bank accounts that paid a market interest rate.

The JPMorgan cash sweep program essentially provides a kickback to its affiliates at customers’ expense, Canales says.

He claims the JPMorgan defendants negotiated one-sided transactions that swept customers’ cash into “exceedingly low-interest” accounts and failed to disclose this conflict to customers.

Canales also alleges JPMorgan breached its fiduciary duty to customers by placing their cash in its affiliates’ low interest-bearing accounts and keeping the unpaid interest as additional profit. 

Had he known his swept cash would be invested in accounts that greatly favored the JPMorgan defendants at his expense, he says he would not have participated in the program or would have done so on different terms.

The complaint asserts claims for violations of New York’s General Business Law, California’s Unfair Competition Law, breach of contract and breach of fiduciary duty. 

The first JPMorgan cash sweep lawsuit was filed in New York federal court.

What do you think about the allegations in the JPMorgan class action lawsuit? Join the discussion in the comments.

Canales is represented by Scott Edelsberg and Adam A. Schwartzbaum of Edelsberg Law PA.

The JPMorgan cash sweep class action lawsuit is Jamie Canales v. JPMorgan Chase & Co., et al., Case No. 5:24-cv-02018, in the U.S. District Court for the Central District of California.

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