JPMorgan Chase will pay $1.42bn in cash to resolve most of a lawsuit accusing it of draining Lehman Brothers of critical liquidity in the final days before that investment bank's September 2008 collapse.
It resolves the bulk of an $8.6bn lawsuit accusing JPMorgan of exploiting its leverage as Lehman's main "clearing" bank to siphon billions of dollars of collateral just before Lehman went bankrupt on September 15, 2008, triggering a global financial crisis.
Lehman's creditors charged that JPMorgan did not need the collateral and extracted a windfall at their expense.
Monday's settlement also resolves Lehman's challenges to JPMorgan's decision to close out thousands of derivatives trades following the bankruptcy, court papers showed.
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