JPMorgan Chase traders charged with manipulating precious medals markets

JP Morgan

People walk inside JP Morgan headquarters in New York

"While at JPMorgan I was instructed by supervisors and more senior traders to trade in a certain fashion, namely to place orders that I meant to cancel before execution", former trader John Edmonds said at a October 2018 hearing, after admitting to commodities fraud and conspiracy. Investigators are examining a paper trail related to the spoofing activities, another person said, in addition to drawing on testimony from former insiders.

Trunz, who entered his guilty plea on August 20, said he manipulated futures markets for gold, silver, platinum and palladium from offices in New York, London and Singapore from 2007 to 2016.

The charges were the latest turn in a years-long investigation that has previously yielded guilty pleas from traders at several banks, including two from JPMorgan.

By creating an illusion of demand, spoofers can influence prices to benefit their market positions.

"The defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals future contracts and defraud market participants", said Assistant Attorney General Brian A. Benczkowski.

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Smith, of NY, and Nowak, of New Jersey, were previously placed on leave pending the outcome of the investigation, Reuters reported.

Edmonds said the goal was to falsely transmit liquidity and price information in order to deceive other market participants about the supply and demand so they would trade against the orders that JPMorgan wanted to execute.

The case is the latest in a series of prosecutions brought by U.S. regulators as they have cracked down on spoofing.

The judge ordered that they have no contact with co-defendants, witnesses, and current or former employees of JPMorgan's precious metals desk unless their lawyers are present.

Federal prosecutors are closing in on JPMorgan Chase & Co officials in an investigation of price rigging in precious metals markets.

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A December 2018 class action complaint, for example, said that Edmonds, Nowak, Gottlieb and others made hundreds of spoof orders or more as "part of a conspiracy" with the bank and other internal traders. Gottlieb didn't respond to a request for comment. Nowak and Jordan didn't return requests for comment.

The three traders are also accused of layering the deceitful trades so they would be hidden from the CME Group and their bank, which is cooperating and not been accused of wrongdoing.

In one of the lawsuits brought against the bank by Daniel Shak, a metals trader, Shak estimated he suffered immediate losses of around $25million after he was forced to liquidate his position as a result of JPMorgan's market manipulation, a court document showed.

Each of the three JP Morgan employees was hit with charges of conspiracy to commit wire fraud affecting a financial institution, bank fraud, commodities fraud, price manipulation and spoofing; bank fraud; wire fraud affecting a financial institution; and conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity, often known as RICO conspiracy, the DOJ said.

JPMorgan declined to comment on the charges.

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Separately, the U.S. Commodity Futures Trading Commission said on Monday it has charged Nowak and Smith for spoofing and manipulating prices in the precious metals futures market.

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