How did this bank manipulate silver prices back since 2008?

Two traders in JP Morgan Chase have been accused for manipulating silver prices from 2008 to 2016. Two traders namely Michael Nowak, a managing director at JP Morgan who heads precious metal units and Gregg Smith, who has worked in the firm’s precious metal trading unit have been accused to have manipulated silver prices.

These traders have been manipulating prices using a method called spoofing, Spoofing refers to the tactic where order trades are placed with an intent to cancel the orders. These JP Morgan traders have been spoofing with the silver metal prices from July 2007 to August 2016. An employee in JP Morgan who has been cooperating with the investing himself admitted to have learned to spoof from senior traders.

JP Morgan owns world’s largest stockpile of silver i.e. 500 million ounces. One more name has been associated with the silver price manipulation- Bear Stearns. On US Treasury and Federal Reserve’s order, JP Morgan took over the Bear Stearns, the failing investment bank in 2008. Bear Sterns had the largest position in COMEX gold and silver back then. After the acquisition of this bank, JP Morgan became the metals’ largest short seller.

Back in 2017, COMEX Business Conduct was found to have spoofed in gold future markets. However, he neither denied nor accepted the accusation and paid a fine of $95000 along with a suspension from trading for 10 business days.

This has not been the only time when employees from JP Morgan have been accused of price manipulation for expensive metals. Back in October, John Edmonds, a former employee at JP Morgan, was accused of manipulating gold and silver prices by working with some unnamed conspirators between 2009 and 2015. Even Edmond confessed to have learned the strategy of spoofing from senior traders back when he was at JP Morgan.

The US Justice Department has been investigating since past few years in the field of metals’ price manipulation. In last five years, 12 cases of spoofing have been known against 16 defendants and most of these have ended in a guilty plea.

The JP Morgan silver manipulation case has been taken as just the beginning of a lot of revelations. A number of too big to fail banks are doubted to have been doing such manipulations. Such manipulations are likely to destroy trust of investors and general public on the integrity of these banks. These manipulations show that a number of regulations related to trade are required in the international market. A number of small investors are being affected in the commodity market due to such fraudulent activities.

Source: CNBC