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JPMorgan's 'big hitters' of gold market go to trial over spoofing
By Eddie Spence and Tom Schoenberg
Bloomberg News
Thursday, July 7, 2022
Michael Nowak was once the most powerful person in the gold market.
The former JPMorgan Chase & Co. managing director ran the bank's precious metals business for more than a decade, making hundreds of millions of dollars in profit trading everything from silver to palladium.
Now, he and two of his former colleagues face a federal jury in Chicago on criminal charges for thousands of so-called spoofing trades, which prosecutors say were used for years to generate illicit gains for JPMorgan and its top clients.
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The trial, slated to kick off today, threatens to lay bare the inner workings of the prestigious bank that has long dominated the market for gold. The government says Nowak's business operated as a criminal enterprise, manipulating prices from 2008 to 2016 by placing thousands of trade orders that were never intended to be executed. If convicted, the three men are among the biggest players yet to face prison for price manipulation.
"These are big hitters," said Robin Bhar, a former metals strategist at Societe Generale SA who spent more than three decades in the industry. "Coming to court gives it a lot more transparency in what is a very opaque market."
The trial comes after years of a U.S. government crackdown on price manipulation that saw JPMorgan pay $920 million to settle spoofing claims two years ago. With $330 billion of notional value in precious metals derivative contracts at the end of March, the New York-based bank accounts for 67% of the positions put through US banks. It holds three times as much as the next-biggest player, Citigroup Inc., data show.
Nowak, who was also a board member of the body that runs the London gold market, faces 15 counts, including commodities fraud, conspiracy to engage in racketeering and price manipulation, and spoofing -- planting fake orders into the market to steer others into buying or selling at prices that favor the bank. Trader Gregg Smith faces 13 counts, while Jeffrey Ruffo, a salesman, faces two counts. A fourth defendant, trader Christopher Jordan, is scheduled to be tried separately on Nov. 28.
All four have pleaded not guilty and face decades in prison if convicted on all charges. ...
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