JPMorgan Chase sued customers for check fraud, alleging they exploited a temporary technical glitch to withdraw funds improperly.
The glitch, which went viral on TikTok and other social media platforms in late August, allowed customers to deposit large checks at ATMs and withdraw funds immediately before the checks being cleared. This resulted in withdrawals despite the checks bounced later, Reuters reported.
Chase has initiated four lawsuits, on Monday, in three federal courts in Houston, Los Angeles and Miami, alleging that two individuals and two businesses unlawfully kept over $661,000 after depositing checks that were later identified as counterfeit.
Each lawsuit contends the bank's security team approached the defendants and asked them to "pay the amount of any overdraft along with any fees that apply."
As the defendants failed to respond, the bank claims they have breached their deposit agreements which the customers sign when they open accounts with the bank. The bank is seeking recovery of the improperly withdrawn funds, along with additional costs.
The biggest case involves a man from Houston who owes the bank $290,939.47 after withdrawing the bulk of a $335,000 check in two days. This check, which was deposited by a masked accomplice on Aug. 29, was later rejected on Sept. 4, as stated in the bank's filing in Texas.
"On August 29, 2024, a masked man deposited a check in Defendant's Chase bank account in the amount of $335,000," the bank stated. "After the check was deposited, Defendant began withdrawing the vast majority of the ill-gotten funds."
In the other two cases, the bank lost amounts ranging from $80,000 to $141,000, CNBC reported.
Based on industry standards, the bank allows customers to withdraw a portion of any deposited check before the funds have cleared, which typically takes a couple of days.
But, the temporary glitch enabled customers to withdraw larger amounts than usual before the checks cleared, allowing them to write checks to themselves and access cash before those checks bounced.
Videos of people celebrating went viral as they pulled out large amounts of cash from Chase ATMs soon after depositing fraudulent checks.
JPMorgan is investigating thousands of potential cases related to the "infinite money glitch," but has not revealed the extent of the losses involved.
Fraud involving paper checks has led to $26.6 billion in losses globally last year, according to Nasdaq's Global Financial Crime Report.
JPMorgan will give priority to cases involving large amounts of money and possible links to criminal groups. These civil cases are separate from the criminal investigations, which the bank has referred to law enforcement officials.
"Fraud is a crime that impacts everyone and undermines trust in the banking system," JPMorgan spokesman Drew Pusateri said in a statement to CNBC. "We're pursuing these cases and actively cooperating with law enforcement to make sure if someone is committing fraud against Chase and its customers, they're held accountable."
New York-based JPMorgan is the largest bank in the U.S. by assets, with nearly $3.5 trillion.
