We wrote about this JPMorgan metals manipulation case that the DOJ is handling this am in our daily email, now that have had the chance to read through the Indictment, it would appear that this is getting bigger and better by the day. As of right now there have been 12 people charged and the DOJ is starting to realize this thing spread far and wide beyond the walls of JPMorgan. According to Bloomberg, three other banks- Deutsche, HSBC and UBS have agreed to pay $50M ( Deutsche Bank agreed to pay $30 million, UBS $15 million and HSBC $1.6 million. The banks didn’t admit or deny wrongdoing. ) to settle civil claims by the CFTC. This I have a feeling is going to get a whole lot bigger once they take down some of the bigger fish they got their eye on now.
They played this one in typical prosecutor fashion, they got the little guys and painted a clear picture of the hell they would create unless they rolled on someone else and it created a nice ripple effect. According to Peter Carr (DOJ Spokesman) two of the so far 12 charged pled guilty and are cooperating with authorities.
Now the DOJ has their sites on the big dogs, indictments unsealed on Monday of this week showed they charged Michael Nowak, who was the former head of precious metals trading desk, Gregg Smith and Christopher Jordan who were both executive directors at the metals desk (whatever that means).
Full Bios pulled right from DOJ:
- Gregg Smith, 55, of Scarsdale, New York. Smith was an executive director and trader on Bank A’s precious metals desk in New York. He joined Bank A in May 2008 after it acquired another U.S. bank (Bank B).
- Michael Nowak, 45, of Montclair, New Jersey. Nowak was a managing director and ran Bank A’s global precious metals desk. He joined Bank A in July 1996.
- Christopher Jordan, 47, of Mountainside, New Jersey. Jordan joined Bank A in March 2006 and was an executive director and trader on Bank A’s precious metals desk in New York. Jordan left Bank A in December 2009 and worked as a precious metals trader at a Swiss bank (Bank C) in New York from March 2010 until August 2010. From June 2011 until October 2011, Jordan traded precious metals futures contracts as an employee of a financial service company (Company D) in New York.
Bank A = JP Morgan
The only person missing it would appear from this is Blythe Masters who was former Executive at JPMorgan.
“The defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants,” said Assistant Attorney General Brian A. Benczkowski. “These charges should leave no doubt that the Department is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets.”
“Smith, Nowak, Jordan, and their co-conspirators allegedly engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply-and-demand,” said FBI Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office.
“Not only did their alleged behavior affect the markets for precious metals, but also correlated markets and the clients of the bank they represented.
Each of the three defendants was charged with one count of conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity (more commonly referred to as RICO conspiracy); one count of conspiracy to commit wire fraud affecting a financial institution, bank fraud, commodities fraud, price manipulation and spoofing; one count of bank fraud and one count of wire fraud affecting a financial institution. In addition, Smith and Nowak were each charged with one count of attempted price manipulation, one count of commodities fraud and one count of spoofing.
The indictment alleges that the defendants engaged in widespread spoofing, market manipulation and fraud while working on the precious metals desk at JPMorgan through the placement of orders they intended to cancel before execution (Deceptive Orders) in an effort to create liquidity and drive prices toward orders they wanted to execute on the opposite side of the market
” While at JPMorgan I was instructed by supervisors and more senior traders to trade in a certain fashion, namely to place orders that I intended to cancel before execution”, former trader John Edmonds said at a October 2018 hearing after pleading guilty to commodities fraud and conspiracy.
This apparently goes back at least 10 years to 2009 and said parties engaged in thousands of episodes hence why they going with RICO which the prosecutors admit really hasn’t been used before on this sort of scale. These traders were able to generate millions of dollars in trading profits for themselves and JPMorgan and cause millions in losses for counter-parties across Gold, Silver, Platinum and Palladium markets.
This investigation has been ongoing, we will continue to update as this develops but not in this article, we will update in new pieces because updates will most likely be pretty spread out.