US Charges Precious Metals Traders Over Alleged Manipulation

The US Department of Justice (DoJ) has charged three JPMorgan Chase & Co (NYSE:JPM) executives with allegedly manipulating prices of precious metals between 2008 and 2016.

The three executives — two current and one former — were charged as part of an ongoing investigation by the FBI.

“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 in a release on Monday (September 16).

The two men still with JPMorgan are the global precious metals desk head Michael Nowak and precious metals trader Gregg F. Smith — both of whom have been placed on leave pending the ongoing investigation. The third man, Christopher Jordan, was a trader who left the bank in 2009.

FBI Assistant Director in Charge William F. Sweeney Jr alleged that the men and their co-conspirators engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply and demand.

“Not only did their alleged behaviour affect the markets for precious metals, but also correlated markets and the clients of the bank they represented,” he said.

The cases are related to what the DoJ called “spoofing,” wherein traders place bids to buy or sell contracts that they intend to cancel before they go through, thereby manipulating other buyers to purchase contracts at higher prices. The DoJ has already obtained guilty pleas from two other former JPMorgan Chase & Co metals traders — Christiaan Trunz and John Edmonds — who faced the same charges.

According to reports by Reuters, lawyers for Nowak have claimed he did nothing wrong, while Smith and Jordan have not made any comment. JPMorgan Chase & Co has also not released any comment on the charges.

Bill Murphy of the Gold Anti-Trust Action Committee (GATA) said that the story was one of a vast criminal enterprise of which JPMorgan was just a part.

“It is one trader after another at JPMorgan getting in trouble for market manipulation, with their superiors in on the case about what is going on. Ironically, these trader operations are rinky-dink compared to the overall rigging of the gold and silver prices, which involve massive price suppression, that have been ongoing for a very long time.”

Murphy said that JPMorgan traders rigging deals was just part of what the bank did.

“Years ago they were fined US$35 billion in a single year for rigging markets. JPMorgan is part of a gold cartel which manipulates the gold and silver markets. The center of their operations is the Comex. As a result, the open interests (long and short positions) in each market are not that far from all-time highs, much of which represents their selling of paper gold and silver,” he said.

“If it were not for these operations the gold and silver prices would be much higher than they are now. As is, gold has made all-time highs in 73 other countries.”

Ed Steer of the Gold and Silver Digest was on the same page, telling INN via email, “Ted Butler says, rightly, that JPMorgan has been the ring-leader in the precious price management scheme since they took over Bear Stearns back in 2008. But there are seven other commercial entities that are also involved … mostly US banks and investment houses … the two largest being Citigroup (NYSE:C) and HSBC USA (NYSE:HSBC).”

Steer said that, despite the charges against the three traders, it was not the end of traders rigging deals at JPMorgan.

“The price of silver is still at US$18 … not US$100-plus, which is where it would be if this price management scheme didn’t exist,” he said.

Murphy also described silver as a repressed asset due to actions by JPMorgan, saying that it was only just now breaking out.

“Once it breaks above US$21 an ounce, it ought to head for US$100 an ounce far faster than most can imagine.”

On the New York Stock Exchange on Monday, JPMorgan was trading down by 0.89 percent at US$119.16, ending what had been a run of day-to-day gains since the beginning of September.

Gold was up on Monday back above the US$1,500 mark at US$1,505.90, while silver was up as well to US$17.91 an ounce.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.