DoJ charges three JP Morgan traders with price manipulation

Federal prosecutors have indicted two current and one former JP Morgan traders with price manipulation in precious metals.

Lawrence Delevingne, Susan Heavey, and Koh Gui Qing had the news for Reuters:

The Department of Justice charged two current and one former JPMorgan Chase & Co (JPM.N) executives on Monday with alleged racketeering and manipulating prices of metals such as gold, silver, platinum and palladium between 2008 and 2016.

The charges came from an “ongoing” investigation into alleged fraudulent trading practices at JPMorgan that generated “millions of dollars in profit” for the bank and “tens of millions of dollars of losses” for its customers, said Brian Benczkowski, an assistant attorney general.

The three men – global precious metals desk head Michael Nowak, precious metals trader Gregg F. Smith, and former trader Christopher Jordan, who left JPMorgan in 2009 – were charged with a racketeering conspiracy and other federal crimes, the Department of Justice said in a statement.

CNN’s Anneken Tappe quoted a statement by the FBI:

“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,” William F. Sweeney Jr., FBI assistant director in charge of the FBI’s New York field office, said in a statement.

Nowak’s lawyer, David Meister and Jocelyn Strauber, said in an emailed statement, “it’s truly regrettable that the DOJ decided to go forward with a prosecution of Mike Nowak, who has done nothing wrong. We look forward to representing him at trial and expect him to be fully exonerated.”

James Benjamin, an attorney for Jordan, said in a statement, “Chris Jordan is innocent of these heavy-handed charges, and we intend to defend him vigorously.” The lawyer for Smith declined to comment.

The government claims the defendants engaged in “widespread spoofing, market manipulation and fraud” by placing trade orders they planned to cancel before executing them, according to a Justice Department statement. The aim “was to trick” other traders into buying and selling futures contracts at prices and at times they wouldn’t have otherwise done, the Justice Department alleges.

Dan Mangan reported for CNBC:

In the past year, two other former precious traders at J.P. Morgan, John Edmonds and Christian Trunz, have pleaded guilty to spoofing-related charges. And Corey Flaum, who worked with Gregg Smith at Bear Stearns, pleaded guilty in July.

“One of my initiatives in the criminal division is to expand our use of big data,” Benczkowski said. The Justice Department plans to continue to use the data technology as part of the ongoing criminal investigation, as well as, to look at other financial products and trading behaviors at desks in other financial institutions.

The Justice Department’s investigation into J.P. Morgan, which runs one of the world’s largest precious metals businesses through its Global Commodities Group, is ongoing.

“We are continuing to follow the facts where they lead,” Benczkowski said.

When asked whether the Justice Department will seek for J.P. Morgan to disgorge profits and repay investors for losses, Benczkowski said “the bank is involved in discussions with the Justice Department and I think those questions will be part our ongoing discussions with the bank”