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U.S. Charges JPMorgan Suits for ‘Spoofing’ Precious Metals Markets

Last Updated March 4, 2021 2:40 PM
Adam Scott
Last Updated March 4, 2021 2:40 PM

The United States Department of Justice has charged three gold and precious metals traders from JPMorgan on suspicions of market manipulation.

The alleged bad actors include Gregg Smith, 55, Michael Nowak, 45, and Christopher Jordan, 47 — alongside other suspected co-conspirators. At the time of the charges, Smith is an executive director at the American multinational investment bank and financial services holding company. Nowak is a managing director and head of JPMorgan’s global precious metals desk.

JPMorgan: ‘Spoofing’ Precious Metals

Over the span of eight years, the three individuals and their co-conspirators allegedly retroactively canceled orders which they had previously placed while working at the JPMorgan’s precious metals trading desk — to an extent that it created a false impression of the precious metal market’s actual supply and demand. This practice is commonly known as “spoofing.”

The Federal Bureau of Investigation’s New York Field Office assistant director-in-charge, William F. Sweeney Jr., explained :

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

According to the Department of Justice, all three individuals have been hit with charges relating to:

  • conspiracy to commit wire fraud affecting a financial institution
  • wire fraud affecting a financial institution
  • bank fraud
  • commodities fraud
  • price manipulation and spoofing
  • RICO conspiracy

Innocent Until Pleading Guilty

The affected markets include gold, silver, platinum, and palladium futures on the New York Mercantile Exchange and CME Commodity Exchange — which has led the Us Commodity Futures Trading Commission to file a civil enforcement action against both Smith and Nowak.

Using fake orders to rig markets surely can’t be in JPMorgan’s handbook. | Source: Shutterstock

Lawyers for the two JPMorgan employees have both expressed that their clients are innocent  — with the former’s claiming their client “has done nothing wrong” and the latter’s stating that their client “is innocent of these heavy-handed charges.’

Two co-conspirators have already pled guilts to the charges.

All Markets Are Manipulated — When Bitcoin ETF?

The charges of market manipulation against the JPMorgan traders comes a week after U.S. Securities and Exchange Commission chairman Jay Clayton expressed continued concerns over manipulation in the Bitcoin market — which has, thus far, helped prevent the regulatory authority from signing off on an exchange-traded fund (ETF) for the first and foremost cryptocurrency.

Clayton has asked:

“How do we know that we can custody and have a hold of these crypto assets? That’s a key question. An even harder question — given that they trade on largely unregulated exchanges is — How can we be sure that those prices aren’t subject to significant manipulation?”

While Bitcoin market manipulation may be a legitimate concern, the latest charges of precious metals manipulation serve to illustrate that most — if not all — markets are subject to manipulation from large players.