By Jonathan Stempel
NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N) is not liable to a group of former customers of Bernard Madoff who blamed the bank for being actively involved in his Ponzi scheme and ignoring red flags of fraud, a federal appeals court ruled on Wednesday.
The 2nd U.S. Circuit Court of Appeals in Manhattan said the customers failed to show that JPMorgan had enough "control" over Madoff's fraud to justify liability under federal securities laws.
JPMorgan had been sued by roughly 2,500 so-called "net winners" who withdrew more money from their accounts at Bernard L. Madoff Investment Securities LLC than they invested.
Lance Gotthoffer, a lawyer for the customers, said his clients will review their legal options.
Wednesday's decision upheld a May 2016 ruling by U.S. District Judge John Koeltl in Manhattan. [nL2N18F1GG]
Koeltel said the allegations suggested that JPMorgan was at most negligent in dealing with Madoff, once a major client.
Many net winners believe their claims were undervalued in the liquidation of Madoff's firm, and sued other individuals and companies that dealt with the swindler.
Madoff has served roughly eight years of a 150-year prison term. He turns 79 on Saturday.
JPMorgan agreed in 2014 to pay $2.6 billion to settle other Madoff litigation, and in a settlement with the U.S. government acknowledged responsibility for failing to stop Madoff.
The case is Friedman et al v. JPMorgan Chase & Co et al, 2nd U.S. Circuit Court of Appeals, No. 16-1913.
(Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)