A federal grand jury convicted two precious metals traders working for JPMorgan. One was the bank’s top gold trader, and the other was the head of its’ precious metals desk. They were charged with manipulating gold prices by sending misleading orders that they later planned to cancel, which is an illegal strategy known as spoofing. The ruse misleads the market into thinking that supply and demand status has changed, which prompts other traders to change their prices to address the shift. The scheme was outlawed in 2010 as part of the Dodd-Frank reforms passed after the 2008 financial crisis.
The conviction is the culmination of a seven-year Department of Justice campaign to punish those using deceptive trade practices in the futures markets. In 2020, JPMorgan paid $920 million in criminal and regulatory penalties for former employees’ conduct.
While the two were convicted, a JPMorgan salesperson was acquitted. The grand jury also cleared all three men of racketeering and conspiracy charges. These charges would have implied that the precious metal desk was a criminal enterprise working inside Morgan.
Expert witnesses help conviction
This spoofing case was more challenging than previous convictions, which had evidence of guilty parties sending electronic messages that celebrated their illegal exploits. Instead, the prosecution relied on three former traders (for Morgan and others) who acted as cooperating witnesses. They previously admitted to and were convicted of spoofing on the gold market and watched the two men also engage in it – the two men convicted were the most aggressive spoofing practitioners among the group.