JPMorgan Removes Employees Who Pocketed COVID-19 Small Business Relief Funds: FT

JPMorgan Chase & Co JPM terminated a number of employees after an investigation revealed they improperly applied for and received loans meant to assist businesses affected by the COVID-19 pandemic, the Financial Times reported Wednesday.

What Happened: The applications were said to have been made under the Small Business Administration’s Economic Injury Disaster Loan (EIDL) program which extends grants up to $10,000 as well as low-interest loans, according to FT.

The agency asked banks to investigate suspicious activity related to the program, after which the fraudulent applications made by the bank's employees reportedly came to light.

JPMorgan discovered that some staff members had deposited EIDL funds into their Chase checking accounts, FT noted.

The New York-based lender's executive committee sent a memo Tuesday warning that such conduct “does not live up to our business and ethical principles — and may even be illegal.”

“Some employees have fallen short, too. We are doing all we can to identify those instances, and co-operate with law enforcement where appropriate,” the committee wrote.

Why It Matters: JPMorgan is also investigating fraud related to the Paycheck Protection Program, a small business assistance measure, for which it was the single largest lender as it dispersed $29 billion in such loans, according to FT.

Last month, Bloomberg uncovered that nearly a billion dollars were sent in EIDL loans to recipients that shouldn't have received the assistance.

The investigation revealed that SBA approved far more loans than the number of eligible businesses in certain parts of the United States.

In July, a case of fraud related to PPP loans was discovered, wherein a man received nearly a million dollars in assistance, only to transfer the funds to his cryptocurrency trading account at Coinbase.

Price Action: JPMorgan shares closed nearly 0.9% higher at $100.87 on Wednesday and gained 0.16% in the after-hours session.