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JPMorgan inherited 'spoof' method from Bear Stearns and refined it, indictment says

Section: Documentation

A powerful vindication of silver market analyst and whistleblower Ted Butler, who long has said the racket began with JPMorganChase's acquisition of Bear Stearns.

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By Tom Schoenberg and David Voreacos
Bloomberg News
Monday, September 16, 2019

When JPMorgan Chase & Co. took over Bear Stearns more than a decade ago, it got two traders with a new trick.

Their strategy: Use multiple fake orders to manipulate the prices of precious metals futures. The maneuver, adopted by the traders' new colleagues at JPMorgan, became part of a spoofing and rigging campaign so expansive that federal authorities have now likened it to a criminal enterprise operating inside the U.S.' biggest bank.

In a criminal indictment unsealed today --

-- U.S. prosecutors accused three JPMorgan traders of rigging futures trades in precious metals for nearly a decade, making millions of dollars for the bank at the expense of counterparties that included the bank's own clients.

... Dispatch continues below ...


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The charges were the latest turn in a years-long investigation that has previously yielded guilty pleas from traders at several banks, including two from JPMorgan. Prosecutors said more than a dozen JPMorgan employees ultimately helped make manipulative "spoof" trades for the bank, in part by using the strategy their new colleagues brought in May 2008.

That pair, Gregg Smith and Christiaan Trunz, showed their new JPMorgan colleagues "a new style of layering multiple deceptive orders at different prices in rapid succession," prosecutors wrote. The strategy made their market spoofing more difficult to execute and detect, prosecutors wrote in the indictment of Smith and two others. Trunz pleaded guilty last month and is cooperating with authorities.

The strategy was adopted by Michael Nowak, who was JPMorgan's global head of precious metals trading when he was put on leave last month. ...

The Commodity Futures Trading Commission also filed a lawsuit against Nowak and Smith today and settled a suit against Trunz. ...

JPMorgan bought Bear Stearns in a marriage arranged by the U.S. Federal Reserve during the height of the financial crisis in 2008.

Already, people inside JPMorgan were using deceptive trading methods, prosecutors said. Their new colleagues brought new ones. In May, the same month the deal was completed, Smith executed the deceptive-layering technique, the indictment said. ...

... For the remainder of the report:

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