Trustee Sues JPMorgan, Alleging Bank Enabled Disbarred Lawyer’s $20 Million Client-Fund Theft

The trustee overseeing the bankruptcy of disbarred New York attorney Mitchell Kossoff's law firm has sued JPMorgan Chase, alleging the bank knew about Kossoff's misuse of client funds but failed to intervene, allowing nearly $20 million in stolen money to disappear.

In a lawsuit filed Wednesday in Manhattan bankruptcy court, Albert Togut, the court-appointed Chapter 7 trustee of Kossoff PLLC, accused JPMorgan of being "complicit" in Kossoff's fraud. Togut alleges that the bank knew Kossoff was commingling and misappropriating money held in client accounts and nevertheless failed to prevent or report the activity.

The trustee is seeking $18.5 million from JPMorgan Chase.

The lawsuit centers in part on a bounced check from one of Kossoff's client accounts in 2015. According to Togut, the incident should have triggered a report to the New York Lawyers' Fund for Client Protection, a state agency responsible for addressing claims arising from attorney misconduct.

Togut alleges that JPMorgan failed to make the required report.

"The fraud would have ended there. Defendant allowed it to continue," Togut said in the lawsuit.

The allegation puts the bank's handling of Kossoff's accounts at the center of the bankruptcy trustee's effort to recover funds lost through the attorney's scheme.

Kossoff is accused of using clients' money to finance personal expenses.

Kossoff was once a prominent figure in New York's real estate market before his law practice collapsed under the weight of the fraud allegations.

New York prosecutors accused him of misappropriating more than $14.6 million from at least 35 people and companies. Kossoff pleaded guilty in December 2021 to one count of fraud and three counts of grand larceny.

Prosecutors said Kossoff diverted money from client accounts to support another family business and cover his personal expenses. His spending included an average of about $16,000 a month on personal credit-card bills and roughly $19,000 a month to rent a luxury apartment in Manhattan.

The amounts were pointed to as evidence of how client funds allegedly became a source of financing for Kossoff's personal lifestyle and other financial obligations.

Kossoff was ultimately sentenced to up to 13.5 years in prison. He is now 72 and incarcerated at Groveland Correctional Facility, according to New York correctional records. He is eligible for parole beginning in November.

The bankruptcy lawsuit is separate from Kossoff's criminal case and shifts attention toward whether another party can be held financially responsible for losses stemming from the scheme.

At the heart of Togut's case is the allegation that JPMorgan had information that should have raised concerns about the handling of client funds. The trustee argues that the bank's alleged failure to report the bounced check allowed the misconduct to continue for years and contributed to the eventual losses suffered by Kossoff's clients.

The $18.5 million claim is also notable because it seeks to recover a substantial portion of the funds allegedly lost through Kossoff's misconduct from the financial institution that maintained his accounts.

JPMorgan's response to the allegations could determine how the bank contests the trustee's claims, including whether it disputes having sufficient knowledge of Kossoff's conduct or any legal obligation to act in the manner alleged.

For now, the lawsuit adds a new layer to a fraud case that has already resulted in Kossoff's criminal conviction and imprisonment. The bankruptcy proceeding is now seeking to trace responsibility beyond the lawyer himself, with the trustee arguing that the banking relationship should have provided an earlier opportunity to detect and halt the theft.