JPMorgan's Top Metals Trader in the Crosshairs for Illegal Gold and Silver Manipulation / Commodities / Market Manipulation
MichaelNowak, the global head of trading for both base and precious metals at JP Morgan Chase, has been charged by the US Justice department for his role inan illegal market manipulation operation. Executive Directors Gregg Smithand Christopher Jordan were also indicted.
The three are the latest targets in a widening DOJ criminal probe.
Nowakand Smith and Jordan are the third, fourth and fifth persons to be chargedin the criminal price rigging scheme at JPMorgan. They may not be thelast. The bank is the most infamous amongst precious metals investors who havebeen crying foul over obvious price manipulation for years.
ChristianTrunz and John Edmonds, who worked for Nowak, have already pleaded guilty andagreed to cooperate with the investigation. They have outlined an operationthat spanned nearly a decade and “thousands” of fraudulent trades. They havesaid their training in the dark arts of rigging prices and cheating clients wasprovided by more senior bank executives.
Theywere likely referring to Nowak, who is the highest placed executive set toface the music thus far.
ShouldNowak also plead guilty and provide evidence against his superiors, things willget even more interesting. It would signal the matter isn’t going to be handledin the usual way, i.e. with some lower level staffer taking the fall – andregulators pretending the problem has been addressed.
Tradersat Bank of America and Deutsche Bank have also pleaded guilty to spoofing. Evidence shows themworking together with their peers at other bullion banks, including JPMorgan,to cheat their respective clients.
Thepicture emerging is not one of traders at competing banks striving to serveclients well and win business, though that is what naive clients expected.Instead, bankers placed bets against their customers. Then they used theirweight in the markets and called in favors with friends at other banks toassure they won those bets.
Thus farthe federal regulator tasked with enforcing fair commodities markets, the CFTC,has been quiet about its complete failure to crack down on the widespread andlong-running fraud operation. The banks implicated continue to tradein the metals markets, which begs the question about whether any amount offraud would be sufficient for their privileges to be revoked.
Theseand other schemes may have worked to push prices down, something long suspectedby frustrated gold bugs.
Thebullion banks are infamous for their massive short positions in gold andsilver. Whether all those shorts are simply a natural by-product of sellingcontracts to any and all retail speculators, or whether they are piled up aspart of a deliberate price suppression effort sanctioned by the Fed, is notcertain.
Eitherway, the bullion banks’ incentive, generally speaking, is to profit frombetting prices will fall. And the trading desk at JPMorgan has an incredibletrack record of profitable trades. In 2016 the bank did not have a singletrading day in which they lost money. Now we know more about how the bank achieved such remarkableresults.
TheJustice Department and federal regulators, if the CFTC ever decides tolift a finger, might end up being the least of the bullion banks’ worries.Class-action attorneys and the victims they represent are readying civillawsuits.
Theyshould be able to provide proof to juries that traders at multiple banksspent years operating a large and well-coordinated racket, under thesupervision and direction of very senior executives. The potential liabilityfor bullion banks will be huge.
By Clint Siegner
Clint Siegner is a Director at MoneyMetals Exchange,perhaps the nation's fastest-growing dealer of low-premium precious metalscoins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon,puts his experience in business management along with his passion for personalliberty, limited government, and honest money into the development of MoneyMetals' brand and reach. This includes writing extensively on the bullionmarkets and their intersection with policy and world affairs.
© 2019 Clint Siegner - All Rights Reserved
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