America’s biggest bank, JPMorgan Chase has agreed to pay more than $US920 million ($1.29 billion) to resolve US regulators’ authorities’ claims of market manipulation in the bank’s trading of metals futures and Treasury securities over an eight-year period.
The massive fine was revealed late Tuesday and is the largest sanction ever linked to the illegal practice known as spoofing or market manipulation through false buy or sell orders.
The news came after trading had finished for the day. In the regular session, JPMorgan shares fell 0.8% but edged up 0.05% in after-hours dealings.
It is the largest monetary penalty ever imposed by the Commodities Futures Trading Commission, the CFTC which regulates activities in markets where financial and commodity futures are traded. These are typically the Nymex oil market in US, the Comex metals market, the various markets such as the Chicago Board of Trade and the Chicago mercantile Exchange (CME) which trade financial and current futures (https://www.cftc.gov/PressRoom/PressReleases/8260-20
The Commission said the penalty includes a $US436.4 million fine, $US311.7 million in restitution and more than $US172 million in disgorgement (giving back profits or other gains). The CFTC said its order will recognise and offset restitution and disgorgement payments made to the Department of Justice and Securities and Exchange Commission.
Half dozen JPMorgan employees have been charged for allegedly rigging the price of gold and silver futures for more than eight years. Two have entered guilty pleas, and four others are awaiting trial.
The CFTC said in its release that the charges “involved hundreds of thousands of spoof orders in precious metals and U.S. Treasury futures contracts on the Commodity Exchange, Inc., the New York Mercantile Exchange, and the Chicago Board of Trade.”…”The order finds that JPM’s illegal trading significantly benefited JPM and harmed other market participants.”
“The order finds that, from at least 2008 through 2016, JPM, through numerous traders on its precious metals and Treasuries trading desks, including the heads of both desks, placed hundreds of thousands of orders to buy or sell certain gold, silver, platinum, palladium, Treasury note, and Treasury bond futures contracts with the intent to cancel those orders prior to execution,” the CFTC said.
“Through these spoof orders, the traders intentionally sent false signals of supply or demand designed to deceive market participants into executing against other orders they wanted filled. According to the order, in many instances, JPM traders acted with the intent to manipulate market prices and ultimately did cause artificial prices.”
“The order notes that during the early stages of the Division of Enforcement’s investigation, JPM responded to certain information requests in a manner that resulted in the Division being misled. The order recognizes, however, JPM’s significant cooperation in the later stages of the investigation,“ The Commission said in the statement.
The fine and charges against JPMorgan are not the only moves against companies and traders in this massive investigation into spoofing. The activities ran from March 2008 to August 2016, according to the CFTC.
More than two dozen individuals and firms have been sanctioned by the US Justice Department or the CFTC, including day traders operating out of their bedrooms, sophisticated high-frequency trading companies and big banks such as Bank of America and Deutsche Bank.
The US Justice Department took a much more aggressive tack with JPMorgan by claiming that the bank conducted the spoofing activities for a long time via an eight-year market manipulation conspiracy with its precious metals desk.
The Department said this was a criminal racketeering operation which allowed the authorities to use the draconian RICO legislation (which is used to attack organised crime) against the bank.
