Bbg: $JPM Gold Desk Ripped Off Market Years

Bloomberg headline: JPMorgan Gold Desk Ripped Off Market for Years, Jurors Told

:pushpin: US says three from bank ‘decided to cheat’ with spoof trades

:pushpin: Defense says orders were genuine, didn’t manipulate prices

ByTom Schoenberg and Alex Nguyen
July 8, 2022, 8:01 PM UTCUpdated onJuly 8, 2022, 10:56 PM UTC

The precious-metals business at JPMorgan Chase & Co. operated for years as a corrupt group of traders and sales staff who manipulated gold and silver markets for the benefit of the bank and its prized clients, a federal prosecutor told jurors in Chicago.

“This case is about a criminal conspiracy inside one of Wall Street’s largest banks,” said Lucy Jennings, a prosecutor with the Justice Department’s fraud section. “To make more money for themselves, they decided to cheat.”

The trial of three former JPMorgan employees, including the veteran head of precious metals, Michael Nowak, is the most ambitious effort yet in a years long US crackdown on market manipulation and spoofing. Unlike past cases of alleged trading fraud, the trio is accused of a racketeering conspiracy under the 1970 Racketeer Influenced and Corrupt Organizations Act – a criminal law more commonly used against the Mafia rather than global banks.

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In defense of the traders:

Jonathan Cogan, Smith’s attorney, said gold and other precious metals were traded in a marketplace where computer-generated algorithms can buy and sell commodities in one-millionth of a second. To compete with the so-called “algos,” and to execute trades on behalf of JPMorgan clients, Smith routinely had buy and sell orders at the same time, Cogan said. While some orders were only active for seconds, that’s “an eternity” in such a fast-moving market, he said.

According to Meister, evidence presented at the trial will show that the vast majority of all market orders are canceled, and the typical lifespan of an order is just a couple of seconds.

The defense teams also said there is no evidence, including in JPMorgan chat logs or recorded phone calls, showing what traders Nowak and Smith were thinking, which means prosecutors can’t prove they intended cancel orders before executing them. “In order to win this case, the prosecution must prove beyond a reasonable doubt what was going on in Mr. Smith’s mind all those years ago,” Cogan said.