JPMorgan dealers in a hot situation to manipulate the gold market

Editor’s Note: With so much market volatility out there, stay tuned for the daily news! Immerse yourself in minutes with our quick summary of today’s news and must-read expert opinions. Register here!

(Kitco News) – Jurors have been told that JPMorgan has been tearing up the gold and silver markets for years.

“This case is about a criminal conspiracy inside one of the biggest banks on Wall Street,” said Lucy Jennings, the attorney general for the Department of Justice’s Fraud Division. “To make more money for themselves, they decided to cheat.”

Three former JPM employees are in the firing line, including veteran precious metals chief Michael Novak, gold trader Greg Smith, and Jeffrey Ruffo, an executive who specializes in hedge fund sales. All are charged with racketeering conspiracy as well as conspiracy to commit price gouging, electronic fraud, commodity fraud, and plagiarism from 2008 to 2016.

Plagiarism was banned by law in 2010. It involves massive orders that traders cancel before they are executed in an attempt to push prices in the direction they want to make their actual trading profitable.

Prosecutors said in the filings that Smith, a major gold dealer, has executed 38,000 layer sequences over the years, or about 20 a day. Nowak himself was primarily trading options, but he was diving into the futures market to hedge those positions. He tried his hand at layering in September 2009, according to filings, and has gone on to use the technique about 3,600 times. Ruffo allegedly told Smith where he needed the market in order to fulfill orders involving at least two of his hedge fund clients. According to court filings, Moore Capital Management and Tudor Investment Corporation.

This is not the only high-profile issue in recent times. A Chicago jury last year indicted two former precious metals traders at Bank of America Merrill Lynch for plagiarism. In 2020, two Deutsche Bank traders were indicted. In September 2019, JPMorgan admitted wrongdoing and agreed to pay more than $920 million to settle US claims of market manipulation in both precious metals and Treasuries.