Former JPMorgan Metals Traders Jailed For Spoofing And Price Manipulation
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Two former metals traders at banking giant JPMorgan Chase have been jailed for being involved in fraud, attempted price manipulation, and spoofing. The traders are accused of running a market manipulation scheme lasting more than eight years.
Former JPMorgan metal traders jailed
The JPMorgan metal traders sentenced in this case engaged in tens of thousands of unlawful trading practices. The manipulative tactics saw market participants lose more than $10 million of their investment.
One of the sentenced traders is Gregg Smith. Smith is a former head of the global precious metals business at JPMorgan. Smith has received a sentence of two years in prison and must pay a $50,000 fine.
The other jailed trader was a head gold trader at JPMorgan, Michael Nowak. He has received a sentence of one year and one day in prison. He also has to pay a fine of $35,000.
The acting assistant general, Nicole Argentieri, commented on the sentencing, saying that the two used their positions at JPMorgan to manipulate prices for their benefit. The two were among the most powerful traders in the precious metals industry. Argentieri also noted that the case shows the commitment of the Department to holding the people engaging in illegal market prices accountable.
“This case reaffirms the Department’s steadfast commitment to hold accountable those who engage in fraud and manipulation that undermines the investing public’s trust in the integrity of our commodities markets,” Argentieri said.
A price manipulation scheme
The court documents have illustrated this price manipulation scheme. They show that between May 2008 and August 2016, the two metals traders, alongside other traders at the JPMorgan precious metals desk, participated in market manipulation and spoofing activities.
The traders placed orders before canceling them to boost the prices by making it appear that there was a demand for a specific metal. The two also engaged in thousands of trading practices for gold, silver, platinum, and palladium. These traders focused on futures contracts traded at the New York Mercantile Exchange and Commodity Exchange.
Regulators have been trying to crack down on illegal market practices on Wall Street, but proving such cases is usually a challenge because of the trading environment. However, the crackdown goes a long way to boost confidence in this market.
In September 2020, JPMorgan admitted to being complicit in wire fraud concerning illegal trading in the precious metals futures contracts market. The banking giant was also accused of manipulative practices for US Treasury futures contracts, US Treasury notes, and bonds.
JPMorgan secured a three-year deferred prosecution deal under which it was forced to pay over $920 million worth of fines. Spoofing is a trading practice outlawed in 2020 after Congress passed the Doff-Frank Act following a crisis in the financial markets. For racketeering, prosecutors can seek a prison sentence of up to 20 years, but the activity can be hard to prove.
