Three JPM metals traders charged with market manipulation, ‘spoofing’
JPMorgan Chase Traders & Co. accused of manipulating the precious metals market
On Monday, the US Department of Justice said it accuses the former and two working traders in precious metals JPMorgan Chase & Co. that they were involved in fraudulent precious metals futures contracts for eight years.
The defendants are Gregg Smith, Michael Novak and Christopher Jordan. They were indicted in the US District Court for the Northern District of Illinois led by US District Judge Edmond Chung, the department said..
Michael Novak, 45, and Gregg Smith, 55, are on vacation as the third and fourth JPMorgan employees to be linked to the criminal investigation that led to the conviction of two former JPMorgan metal traders..
Christopher Jordan, 47, who left the company in 2009, was an executive director and trader in JPMorgan’s precious metals division in New York..
All three were arrested for spoofing, which involves placing buy orders or offers to sell with the intent to cancel them before execution. By creating the illusion of demand, spoofers can influence prices to improve their market position..
«The defendants participated in a large-scale multi-year scheme of manipulating the market for futures contracts for precious metals and were involved in deceiving market participants», – said Assistant Attorney General Brian A. Benchkovski.
Authorities said the alleged criminal activity lasted more than eight years and included thousands of illegal trade transactions..
Authorities said that on thousands of episodes, employees placed false orders for gold, silver, platinum and palladium futures contracts traded on the New York Mercantile Exchange Inc and Commodity Exchange Inc, which are commodity exchanges operated by CME Group Inc..
«This false and misleading information was intended and sometimes caused other market participants to respond to obvious changes and imbalances in supply and demand by buying and selling precious metals futures contracts in such quantities, prices and at the time when they are more likely to everything, would not do it», – the indictment says.
JPMorgan, one of the largest gold trading banks in the world, said in an August regulation that it «reacts and cooperates» with investigations by various authorities, including the Ministry of Justice, regarding trading practices in the metals markets.
There has been a spike in spoofing harassment in recent years.
For example, Bank of America’s Merrill Lynch division disbursed US $ 25 million in July to resolve the US Commodity Futures Trading Commission and the DOJ regarding fraudulent transactions in the precious metals market between 2008 and 2014..
The Justice Department has already received confessions from two former JPMorgan metal traders, Christian Transz and John Edmonds..
Their statements made in August 2019 and October 2018, respectively, indicated that they were involved in the fraud along with their unnamed executives..
Transz posted «thousand» orders that he did not plan to fill in futures contracts for gold, silver, platinum and palladium between 2007 and 2016. He learned to cheat from older traders, the Justice Department said in August, adding that he went to cooperate with the investigation..