Three weeks ago, when we first reported that JPMorgan - the bank that this week was slammed with a record settlement of nearly $1 billion when it admitted it had manipulated and spoofed the gold and Treasury markets - was probing its employees' role in abuse of PPP funds following reports of "instances in which Covid-relief funds were misused by customers and is probing employees’ involvement in the potentially illegal activities", we said that it was about time the role of banks was put under the microscope because " while it was easy to blame the administration for rushing to hand out hundreds of billions in grants/loans (without which the US economy would still be in a depression), a key question is how and why did the private banks that were gatekeepers for all this capital, allow such abuse to take place."

A few days later, we also found out that not only did JPM employees allegedly enable fraud by clients when obtaining PPP loans, the largest US bank also found that some of its employees themselves "improperly applied for and received", i.e. stole, Covid-relief money that was intended for legitimate U.S. businesses hurt by the pandemic.

The bank discovered the actions, which were tied to the Economic Injury Disaster Loan program, "after noticing that suspicious amounts of money had been deposited into checking accounts owned by bank employees." The findings prompted an unusual all-staff message from JPMorgan Tuesday which according to Bloomberg "puzzled many across the industry for its candid admission of potentially illegal acts by some of its own while not describing what they had done."

At the time, JPMorgan sent a memo to its roughly 256,000 employees in which senior leaders said they had seen “instances of customers misusing Paycheck Protection Program Loans, unemployment benefits and other government programs” and that some employees had fallen short on ethical standards, too.

JPMorgan tried to mitigate this discovery by claiming that only a handful of its employees were abusing the program.

Well, fast forward to today, when we learn that more than 500 JPMorgan employees got assistance from taxpayers aimed at helping businesses through the pandemic "and dozens of them shouldn’t have", according to Bloomberg.

The discovery that so many people at the largest and most profitable U.S. bank had tapped the Economic Injury Disaster Loan program raised suspicions inside the company and set off a hasty probe, the full extent of which hasn’t been previously reported.

Upon discovering that "hundreds of employees" - clearly not the brightest ones as they used checking accounts operated by their employer into which they deposited funds meant for struggling Americans - had received government funds in their accounts, JPMorgan "began scrutinizing director-level employees and workers who received certain amounts." Of almost two dozen in that first group, the bank found that at least five - none of them director-level employees - had improperly tapped the program, one of the people said. We say at least because every update on this issue reveals that more and more employees had illegally tapped the taxpayer-funded program.

Amusingly, the bank concluded that of the hundreds of deposits many were "probably" legitimate - providing funds, for example, to side businesses run on workers’ own time, although how a JPM banker would have a "side" business that suddenly needs emergency funding is probably left best for the upcoming Congressional hearings.

JPM's findings of illegal employee activity come amid a broader sweep of individual accounts that received business aid. On July 22, the SBA warned banks to be on the lookout for suspicious deposits or activity as part of the EIDL program. The SBA's inspector general has also flagged evidence of fraud in the program, saying it identified more than $250 million in aid given to potentially ineligible recipients as well as $45.6 million in possibly duplicate payments. A Bloomberg analysis of SBA data last month identified $1.3 billion in suspicious payments.

As a result, prosecutors have brought charges against more than 20 businesses for fraud under the CARES Act, which authorized the PPP loan program, and a recent report by the House Committee on Oversight suggested that there could have been billions of dollars worth of fraud in the PPP program. Rep. James Clyburn, a Democrat from South Carolina, called on the inspectors general of the U.S. Treasury Department and SBA to investigate the program.

“The SBA does not comment on individual borrowers. Evidence of waste, fraud, and abuse with any of SBA’s loan programs is not tolerated and should be reported. ... The SBA successfully distributed 5.21 million loans and $525 billion to small businesses in an unprecedented amount of time, through the Paycheck Payment Program,” the SBA said, misstating the name of the Paycheck Protection Program.

"This is going to be the biggest fraud in government history, the magnitude of which we will not know for many years to come," said Vic Hartman, a former FBI agent and author of a 2019 book about fraud based on lessons from his career.

In retrospect, it's most surprising that only 500 JPMorgan bankers were involved.