JPmorgan’s head of precious metals trading has been charged by US prosecutors with running an eight-year conspiracy to manipulate markets and defraud customers.
Michael Nowak was charged along with two colleagues, Gregg Smith and Christopher Jordan, with a “massive, multiyear scheme”, assistant attorney-general Brian Benczkowski said.
The indictment alleged that the three traders engaged in “widespread spoofing, market manipulation and fraud” while working at Jpmorgan, one of the biggest bullion banks. They placed orders they intended to cancel before execution in an effort to “create liquidity and drive prices toward orders they wanted to execute on the opposite side of the market”, it said.
The case will increase scrutiny over global precious metals markets and the dominance of large banks such as Jpmorgan. Along with HSBC, Jpmorgan dominates global flows of gold and silver trading.
Mr Nowak, who joined JPMorgan in 1996, is on leave from the bank, according to a person familiar with the matter. Jpmorgan declined to comment.
Between 2008 and 2016, the traders sought to take advantage of algorithmic traders by placing genuine orders to buy or sell futures,
some of them so-called “iceberg orders”, that concealed the true order size, the indictment alleged.
At the same time they placed one or more orders that they intended to cancel before executing, so-called “deceptive orders”, on the opposite side, which were fully visible to the market, the indictment alleged.
“By placing Deceptive Orders, the Defendants and their coconspirators intended to inject false and misleading information about the genuine supply and demand for precious metals futures contracts into the markets,” the DOJ said. “And to deceive other participants in those markets into believing something untrue, namely that the visible order book accurately reflected market-based forces of supply and demand.”
The DOJ alleged the three men named in the indictment placed deceptive orders for gold, silver, platinum and palladium futures contracts on exchanges run by the CME Group.
As well as being traded as investments, the precious metals also have widespread industrial uses, such as silver’s use in solar panels, and platinum’s use in catalytic converters for cars.
A former Jpmorgan trader, Jonathan Edmonds, pleaded guilty to charges of spoofing last November. Another former Jpmorgan precious metals trader, Christian Trunz, pleaded guilty in August.
