JPMorgan To Pay $920 Million For Manipulative Conduct & Spoofing
Kehoe Law Firm, P.C. is making investors aware that on September 29, 2020, the Commodity Futures Trading Commission (“CFTC”) announced that it issued an order filing and settling charges against JPMorgan Chase & Company (“JPMC & Co.”) and its subsidiaries, JPMorgan Chase Bank, N.A., and J.P. Morgan Securities LLC (“JPMS”) (collectively, “JPM”), for manipulative and deceptive conduct and spoofing that spanned at least eight years and involved hundreds of thousands of spoof orders in precious metals and U.S. Treasury futures contracts on the Commodity Exchange, Inc., the New York Mercantile Exchange, and the Chicago Board of Trade. The case was brought in connection with the Division of Enforcement’s Spoofing Task Force.
The order finds that JPM’s illegal trading significantly benefited JPM and harmed other market participants. JPM is required to pay a total of $920.2 million—the largest amount of monetary relief ever imposed by the CFTC—including the highest restitution ($311,737,008), disgorgement ($172,034,790), and civil monetary penalty ($436,431,811) amounts in any spoofing case.
Related Criminal, Civil & CFTC Actions
In a parallel matter, according to the CFTC, the Department of Justice’s Fraud Section and the United States Attorney’s Office for the District of Connecticut announced entry of a Deferred Prosecution Agreement (“DPA”) with JPMC & Co., deferring criminal prosecution of JPMC & Co. on charges of wire fraud. Under the terms of the DPA, JPMC & Co. has agreed, among other things, to pay a criminal fine, disgorgement, and restitution.
In another parallel matter, the U.S. Securities and Exchange Commission (“SEC”) announced entry of an order filing and settling charges against JPMS imposing both disgorgement and a civil monetary penalty. The CFTC order will recognize and offset any restitution and disgorgement payments made to the DOJ and the SEC.
The CFTC previously issued orders in related matters filing and settling charges of spoofing against two traders, both of whom have entered into formal cooperation agreements with the CFTC: John Edmonds [See CFTC Press Release No. 7983-19] and Christian Trunz [See CFTC Press Release No. 8014-19]. In another related matter, the CFTC continues to pursue civil litigation against two other traders, Michael Nowak and Gregg Smith, for spoofing and attempted price manipulation [See CFTC Press Release No. 8013-19].
The order, according to the CFTC, finds that, from at least 2008 through 2016, JPM, through numerous traders on its precious metals and Treasuries trading desks, including the heads of both desks, placed hundreds of thousands of orders to buy or sell certain gold, silver, platinum, palladium, Treasury note, and Treasury bond futures contracts with the intent to cancel those orders prior to execution. Through these spoof orders, the traders intentionally sent false signals of supply or demand designed to deceive market participants into executing against other orders they wanted filled. According to the order, in many instances, JPM traders acted with the intent to manipulate market prices and ultimately did cause artificial prices.
The order also finds that JPMS, a registered futures commission merchant, failed to identify, investigate, and stop the misconduct. The order states that despite numerous red flags, including internal surveillance alerts, inquiries from CME and the CFTC, and internal allegations of misconduct from a JPM trader, JPMS failed to provide supervision to its employees sufficient to enable JPMS to identify, adequately investigate, and put a stop to the misconduct.
The order notes that during the early stages of the Division of Enforcement’s investigation, JPM responded to certain information requests in a manner that resulted in the Division being misled. The order recognizes, however, JPM’s significant cooperation in the later stages of the investigation.
For additional informaiton, please click “J.P. Morgan Securities Admits to Manipulative Trading in U.S. Treasuries.“
Sources: Commodity Futures Trading Commission – CFTC.gov; U.S. Securities and Exchange Commission – SEC.gov
Kehoe Law Firm, P.C.