JPMorgan’s Top Metals Trader in the Crosshairs for Illegal Manipulation

September 16, 2019

By Money Metals News Service

Michael Nowak, the global head of trading for both base and precious metals at JPMorgan Chase, allegedly oversaw an illegal market manipulation operation.

JP Morgan

He was placed on leave in late August and is a target in a widening DOJ criminal probe.

Reuters reports that Nowak and Gregg Smith, whose title is unknown at this time, are the third and fourth people now implicated in a criminal price rigging scheme at the bank. They may not be the last.


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Christian Trunz and John Edmonds, who worked for Nowak, have already pleaded guilty and agreed to cooperate with the investigation. They have outlined an operation that spanned nearly a decade and “thousands” of fraudulent trades. They have said their training in the dark arts of rigging prices and cheating clients was provided by more senior bank executives.

They may have been referring to Nowak and/or Smith, though neither have been arrested or charged as yet. If charges are forthcoming, Nowak will be the highest placed executive to face the music thus far.

Should Nowak also plead guilty and provide evidence against his superiors, things will get even more interesting. It would signal the matter isn’t going to be handled in the usual way, i.e. with some lower level staffer taking the fall – and regulators pretending the problem has been addressed.

Traders at Bank of America and Deutsche Bank have also pleaded guilty to spoofing. Evidence shows them working together with their peers at other bullion banks, including JPMorgan, to cheat their respective clients.

The picture emerging is not one of traders at competing banks striving to serve clients well and win business, though that is what naive clients expected. Instead, bankers placed bets against their customers. Then they used their weight in the markets and called in favors with friends at other banks to assure they won those bets.

These and other schemes may have worked to push prices down, something long suspected by frustrated gold bugs.

The bullion banks are infamous for their massive short positions in gold and silver. Whether all those shorts are simply a natural by-product of selling contracts to any and all retail speculators, or whether they are piled up as part of a deliberate price suppression effort sanctioned by the Fed, is not certain.

Either way, the bullion banks’ incentive, generally speaking, is to profit from betting prices will fall.

All too often that entails rigging markets and defrauding clients.

The Justice Department and federal regulators might end up being the least of the bullion banks’ worries. Class-action attorneys and the victims they represent are readying civil lawsuits.

If they can provide proof to juries that traders at multiple banks spent years operating a large and well-coordinated racket, under the supervision and direction of very senior executives, the potential liability will be huge.

 


The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.