JP Morgan traders charged with manipulating precious metals market

JP Morgan traders charged with manipulating precious metals market

JP Morgan traders charged with manipulating precious metals market

"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., assistant director-in-charge of the FBI's New York Field Office, said.

The defendants allegedly placed orders they meant to cancel just before execution.

By creating an illusion of demand, spoofers can influence prices to benefit their market positions.

Authorities said the alleged criminal activity spanned over eight years and involved thousands of unlawful trading sequences.

Michael Nowak: Joined in July 1996, served as a managing director and ran the global precious metals desk.

Nowak, 45, and Smith, 55, are still employed at the bank, but are reportedly on leave.

For instance, on May 27, 2008 at 8:39 AM, Smith, of Scarsdale, NY, placed an order to sell seven silver futures contracts for $17.575, according to the indictment.

"This false and misleading information was meant to, and at times did, trick other market participants into reacting to the apparent change and imbalance in supply and demand by buying and selling precious metals futures contracts at quantities, prices and times that they otherwise likely would not have traded", the indictment alleges. They are accused of harming JPMorgan's clients and others in the market, prosecutors said.

The case is the latest in a series of prosecutions brought by United States regulators as they have cracked down on spoofing. The bank previously disclosed the investigation into its commodities trading in regulatory documents.

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The Commodity Futures Trading Commission (CFTC) today settled spoofing charges against a former JPMorgan trader who pleaded guilty to similar criminal charges past year.

He pleaded guilty to two counts of conspiracy to commit wire fraud, agreed to meet with investigators and has been cooperating against unnamed co-conspirators, court records show.

The unsealed indictment alleges a racketeering conspiracy between two current precious-metals traders at JPMorgan, as well as one former employee.

In an emailed statement to FOX Business, Nowak's attorneys said their client "has done nothing wrong".

The indictment intensifies pressure on banks for market manipulation.

The civil suits against JPMorgan have been stayed pending the Department of Justice probe. Nowak and Jordan didn't return requests for comment.

A call to Smith's number at the bank was answered by an employee at the metals desk who directed questions to the bank's public relations department.

JPMorgan declined to comment on the charges.

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