Another Settlement – JP Morgan Receives Slap On The Wrist Despite Years Of Fraudulent CFTC Data

Tyler Durden's picture


Submitted by Mike Krieger of Liberty Blitzkrieg blog,

The Commodities Futures Trading Commission (CFTC) has been long viewed as one of the most corrupt of American institutions – and that’s saying a lot. Putting aside all the accusations with regard to silver manipulation in recent years, the most stunning controversy occurred back in 2010 when a retiring judge accused the other remaining judge of being a total bought and paid for Wall Street crony.

The retiring judge was George Painter, who accused fellow judge Bruce Levine of not once ever ruling in favor of an investor in his 20 years on the bench. Not only that, but he claimed this was the result of a promise Levine made to Wendy Gramm, the former head of the CFTC and the wife of Phil Gramm. Phil Gramm was the Congressman who spearheaded the repeal of Glass-Steagall in 1999, which is seen by many (including myself) as one of the most catastrophic pieces of legislation in American history since it laid the groundwork for the financial crisis of 2008, as well as the continued cancerous permanence and power of TBTF banks. FiredogLake covered the CFTC controversy in 2010:

An Administrative Law Judge at the CFTC (Commodity Futures Trading Commission), George Painter, revealed in his retirement letter that a colleague of his, Judge Bruce Levine, has never awarded a case in favor of a plaintiff in 20 years on the bench. He traces this back to a deal Levine made with Wendy Gramm, the former head of the CFTC and the wife of Phil Gramm (R-Enron and UBS). Indeed, the numbers check out, at least for the time period we know about; Judge Levine has never decided in favor of a plaintiff, i.e. never decided in favor of an investor crying mistreatment or fraud by a commodity dealer or major broker in commodity futures and derivatives trading.


Here’s why Painter accused Levine of this misconduct: there are only two Administrative Law judges at the CFTC. “If I simply announced my intention to retire,” Judge Painter says in his letter, “the seven reparation cases on my docket would be reassigned to the only other administrative law judge at the commission, Judge Levine. This I cannot do in good conscience.” He wanted his docket to transfer to an admin law judge at the SEC or FERC instead.

Well it appears nothing has changed at the CFTC. Less than two weeks ago we learned that former CFTC commissioner Scott O’Malia, who had fought hard against any new rules intended to reign in Wall Street practices, was leaving the CFTC to head one the biggest bank lobbying groups in the world, the International Swaps and Derivatives Association (ISDA). This is the exact lobbying group that had been pressing against new CFTC rules. Reuters reported that:

The International Swaps and Derivatives Association said on Wednesday that Scott O’Malia, a Republican who often voted against new CFTC policy in the wake of the financial crisis, will become the trade group’s next chief executive. O’Malia will start his new job as of Aug. 18, ISDA said. The news came only days after O’Malia said he planned to leave the CFTC as of Aug. 8.

There is just zero shame at this point.

A staffer for Republican Senator Mitch McConnell – now the Senate Minority leader – from 1992 to 2001, O’Malia focused on energy policy during much of his career.

Links to Mitch McConnell. No surprise there.

ISDA is a global lobby group for non-listed derivatives, counting the world’s largest investment banks among its members, and has frequently fought regulatory efforts to reform the market after the financial crisis.

Moving along to today’s story, we learn that the CFTC will impose a meager $650,000 fine on JP Morgan, despite years of warnings about fraudulent data reports. The CFTC announced that:

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against J.P. Morgan Securities LLC (JPMS), a wholly-owned subsidiary of JPMorgan Chase & Co. and a CFTC-registered Futures Commission Merchant (FCM), for submitting inaccurate reports to the CFTC relating to the required reporting of positions held by certain large traders whose accounts are carried by JPMS. The reporting violations occurred despite the CFTC notifying JPMS of numerous errors in its reports. The CFTC Order requires JPMS to pay a $650,000 civil monetary penalty to address its unlawful conduct. The reports are known as the “large trader” reports and are used by the CFTC in order to evaluate potential market risks and monitor compliance with CFTC requirements.

These reports are also used by investors to make judgments about markets, so just imagine how much money other firms or even individual investors may have lost using JP Morgan’s fraudulent data? I’m sure it was far more than $650k. As the CFTC itself notes:

CFTC Director of Enforcement Aitan Goelman commented: “The large trader reports are vital to the CFTC’s role in monitoring market behavior and are important to members of the public, many of whom rely on that information in forming trading strategies. Therefore, submission of accurate and reliable data to the CFTC is essential. The CFTC will be vigilant in enforcing these rules in order to ensure the integrity of the regulatory structure and to maintain transparency in the markets.”


The CFTC Order specifically finds that since at least 2012, the CFTC was notifying JPMS about errors in its large trader reports, which increased in frequency throughout the year. In December 2012, the CFTC notified JPMS that the on-going problems were unacceptable. JPMS, relying on its third-party vendor that generated the reports for JPMS, assured CFTC staff that the problems would be resolved on or before the end of January 2013. However, JPMS continued to submit large trader reports that contained hundreds of errors throughout the period from February 1, 2013 to February 2014.

So the CFTC claims it will be vigilant. Like, for example, allowing JP Morgan to continue to issue fraudulent reports for well over a year despite repeated warnings, and then ultimately settle for a dollar amount that is probably equivalent to the Dimon family’s annual budget for toilet paper? Yeah, that’ll show ‘em who’s boss.

You gotta love American justice. In the same week that an NYPD officer’s illegal and fatal chokehold was ruled a homicide (incredibly the man who shot the video has now been arrested), JP Morgan gets off with another slap on the wrist. As Glenn Greenwald noted, it’s Liberty and Justice for Some.

For more articles on the trend of harsh and disproportionate punishment for average citizens, yet immunity for banksters and other powerful figures, read:

The “Nanny States of America” – Mother Arrested for Allowing 7-Year-Old Son Walk to Park Alone

Connecticut Man Arrested for “Passive Aggressive” Behavior to a Watermelon

New Jersey Threatens to Take 13-Year-Old Student From His Father Due to “Non-Conforming Behavior”

Hyper-Sensitive Illinois Mayor Orders Police Raid Over Parody Twitter Account

Charleston Man Receives $525 Federal Fine for Failing to Pay for a $0.89 Refill

Video of the Day – Thuggish Militarized Police Terrorize and SWAT Team Iowa Family

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Mon, 08/04/2014 - 23:09 | 5047420 rehypothecator
rehypothecator's picture

"The laws exist to protect the elites from those they plunder."

Mon, 08/04/2014 - 23:25 | 5047468 TeamDepends
TeamDepends's picture

Thank you sir, may I have another?  (what the audience can't see is that he enjoys the paddle)

Mon, 08/04/2014 - 23:27 | 5047472 COSMOS
COSMOS's picture

Remind me again how this fine pales in comparison to the 6 billion dollar fine against the French Bank


Mon, 08/04/2014 - 23:33 | 5047485 TeamDepends
TeamDepends's picture

It pales in comparison because the man who shot the video has been arrested.  And, er, have you done something with your hair?

Mon, 08/04/2014 - 23:59 | 5047551 wee-weed up
wee-weed up's picture

Still waiting to see Corzine frogmarched...

Oh, never-fukin' mind...

Tue, 08/05/2014 - 02:51 | 5047759 COSMOS
COSMOS's picture

Not much just trying to get it to look like yours lol.  But I do think Rehypo... has changed brands of brown paper bags.

Tue, 08/05/2014 - 04:25 | 5047822 zhandax
zhandax's picture

WWU, if (not so) recent history is any guide, wouldn't hold my breath for any frogmarches.

Tue, 08/05/2014 - 06:47 | 5047923 Xibalba
Xibalba's picture

Matt Taibbi wrote a whole book about it 

Mon, 08/04/2014 - 23:37 | 5047474 nope-1004
nope-1004's picture

In an economy that exists only because it's a ponzi, all financial bodies, regulatory or otherwise,  are all corrupt as hell.

Corruption is the essence of the existing banking system. 


Tue, 08/05/2014 - 00:20 | 5047585 TeethVillage88s
TeethVillage88s's picture

I lost money on Commodities

And I want it BACK!!

- Down with CFTC
- Down with Federal Reserve
- Down with US Treasury
- Down with US Congress
- Down with JP Morgan
- Down with TBTF Banks

- Fuck the Fed, Down with The Fed, End the Fed, No more Fed

- The Fed Failed, they didn't ensure the prudent Budgeting of the Federal Government, they didn't ensure the prudent use of Federal Funds & Defense Spending, they didn't ensure AAA Ratings of US Currency and US Federal Government.
- The Fed is A Failure, The Fed Is A Failure, the Fed is a Fraud, The Fed Is A Fraud, the US Rating is sub-Prime, the US Rating is Sub-Prime

Tue, 08/05/2014 - 04:28 | 5047823 zhandax
zhandax's picture

"You fucked up.  You trusted us".  Animal House

Tue, 08/05/2014 - 06:44 | 5047920 Bossman1967
Bossman1967's picture

AMEN and after the fine the markets are still being manipulated. this is crazy

Tue, 08/05/2014 - 10:32 | 5048657 Grinder74
Grinder74's picture

So let's see, 92.6B revenue, 625k fine.  That comes out to 0.0007% of revenue.  In that case, when the SEC decided to ruin my life, I should have only been fined $1.30.

Mon, 08/04/2014 - 23:13 | 5047431 Downtoolong
Downtoolong's picture

This is an outrage said Judge Bruce Levine. $650k isn’t even enough to pay my pension for two years.

Mon, 08/04/2014 - 23:14 | 5047435 Downtoolong
Downtoolong's picture

For those who don’t want to be regulated, the false appearance of regulation is ten times better than no regulation.

Mon, 08/04/2014 - 23:20 | 5047447 yrad
yrad's picture

And where the fuck is Jon Corzine?!?

Mon, 08/04/2014 - 23:23 | 5047457 erg
erg's picture

So sick of this shit. I've become inured to everything.

Mon, 08/04/2014 - 23:33 | 5047482 Ms. Erable
Ms. Erable's picture

Oh noes - $650k? Someone might have to pick up Jamie's lunch tab tomorrow - but he'll be flush on Wednesday.

Tue, 08/05/2014 - 00:19 | 5047583 Salsipuedes
Salsipuedes's picture

"Justus? Just us? What is just us? It's me and Vinny. Just ME and fuggin' VINNY. Capiche?"

Tue, 08/05/2014 - 01:03 | 5047658 q99x2
q99x2's picture

Jamie Dimon got off on this one but when the collapse picks up a little more momentum I do believe there'll be a gang of Somalian ships headed straight for Jamie Dimon's island.

Tue, 08/05/2014 - 01:04 | 5047662 CheapBastard
CheapBastard's picture

"The law is for the little peeples," she said.

Tue, 08/05/2014 - 01:47 | 5047706 Conax
Conax's picture

"CFTC today issued an Order filing and simultaneously settling charges against J.P. Morgan Securities-"

How neat.  Instead of having a negative story about the charges stinking up the news for a couple weeks, they said 'they lied, but it's settled, $650K is a big fine, move along, move along.'

I doubt Jamie will have to hock his cufflinks or anything. 

Anyway, the COT reports are caca, the inventories are probably BS, too.  No more having to argue about that.

Tue, 08/05/2014 - 02:52 | 5047764 WTFUD
WTFUD's picture

How Bizarre ; the revolving door and parasitic crime of these treacherous evil 'public' servants.

Tue, 08/05/2014 - 02:56 | 5047767 Latitude25
Latitude25's picture

ZH neglects to state which COT repots were rigged.  CFTC is imposing a fine on JP Morgan for fraudulently reporting “large trader” dataCFTC Charges JP Morgan With Reporting Fraud.
JP Morgan has finally been caught and sanctioned for playing games with its position reporting in gold and silver in order to hide the true magnitude of its unhedged short positions on the Comex.


Tue, 08/05/2014 - 06:11 | 5047888 Dre4dwolf
Dre4dwolf's picture

The fraud is intentionaly confuzzled so regulators dont exactly know what jp organ is doing wrong. When the people enforcing the laws cant tell a criminal act apart from a non criminal act know shits bad

Tue, 08/05/2014 - 05:48 | 5047876 Dre4dwolf
Dre4dwolf's picture

Lol 650k $? No problem jpmorgan will go fake some loans foreclose on grandma and get a bailout while america becomes homeless all while eating 1000$ steak dinners and doing blow off a hookers ass. 

Tue, 08/05/2014 - 05:57 | 5047881 buzzsaw99
buzzsaw99's picture

Tuco: [shouting] Hey, Blond! You know what you are? Just a dirty son-of-a-b-! [/the good, the bad, and the ugly]

Tue, 08/05/2014 - 05:57 | 5047882 Frankie Carbone
Frankie Carbone's picture

This is the establishment's equivalent of leaving pennies for a waiter or waitress.

The pitiful fine was their way of saying "Yes, we are ripping you off, but in reality we are not. How can we rip off our own property? The US of A is our plantation, and you work our fields. Master steals bread from your table. But since master provides the bread, and you are his property anyways, how can he be stealing? Yet, since you slaves complain, I will acknowledge your complaint by fining myself a penny. So slaves, what is the message that I am sending you?"

Tue, 08/05/2014 - 07:08 | 5047936 SilverIsKing
SilverIsKing's picture

Hide your bread?

Tue, 08/05/2014 - 08:28 | 5048050 Renfield
Renfield's picture

Comments like this are why I love the Hedge.

Tue, 08/05/2014 - 06:12 | 5047892 vyeung
vyeung's picture

Fascism in full view.

Tue, 08/05/2014 - 06:31 | 5047908 USRegulation
USRegulation's picture

Great article. Judge Painter still is perplexed as to why nothing has ever been done about his allegations. A lawyer who worked at the CFTC since inception told me years ago, "the CFTC is the most corrupt Government Agency." And yes, thats saying alot. But it doesn't stop people like Better Markets and Dennis Kelleher, as well as reporters from Bloomberg (Silla Brush) and Reuters (Sarah Lynch, Emily Stephenson & Douwe Miedema) to constantly write that the CFTC is "underfunded".

   We can write all we want about the CFTC, but unless something is done soon, it will continue to be business as usual under Regulatory Capture.

Tue, 08/05/2014 - 07:13 | 5047910 ugmug
ugmug's picture

Satan was the world's first commodity dealer.

Satan sold all of his options on a fruit tree to some dumbass woman who then resold it to some dumbass man. This vicious cycle of dumbass to dumbass trading is now called economics.

Tue, 08/05/2014 - 07:10 | 5047937 Contrarian View
Contrarian View's picture

Grow up, guys. The CFTC shouldn't exist in the first place. Exactly what good does the regulation they allegedly broke do anybody in the market? The exchanges know what's being traded on them, and the OTC market is at the risk of the bank's shareholders. What benefit to the market is there from having "large trader positions" reported to the federal government? If anything, it provides information that the government could weaponize against certain individuals or firms, or that government employees could use to engage in insider trading. And that's the real corruption.

Tue, 08/05/2014 - 08:33 | 5048042 Renfield
Renfield's picture

<<Grow up, guys. The CFTC shouldn't exist in the first place. Exactly what good does the regulation they allegedly broke do anybody in the market?>>

THANK YOU. You and the guy who commented about the plantation owner leaving a fiddycen fine both get what all these regulatory agencies do and are for. They exist to legitimise government 'oversight'. It is certainly NOT to enforce rules for a level playing field, and NOT for true price discovery. These government regulatory agencies are a waste and a menace.

Knowing this, it kind of makes me laugh when other people, who supposedly ALSO know this, get all hand-wringie over these agencies doing EXACTLY WHAT THEY ARE SET UP TO DO.

Really, guys, really? $650,000 sounds about right to me. Actually, I kinda wish they had made it $50. The CLEARER they are about their job, the better for everyone. Go CFTC! Be as corrupt, as nasty, as putrid and reekin' as we know that you are. Do your filthy dance for us, I love seeing your true colours. I hope every producer who sells real product gets a close look at your colours too.

The problem isn't so much criminals being criminals, as the producers who INSIST on transacting with them.

Tue, 08/05/2014 - 07:14 | 5047945 Fix It Again Timmy
Fix It Again Timmy's picture

Lawyers and judges FOR the .1%, give them what they [.1%] want...

Lawyers and judges AGAINST the 99.9% give them [99.99%] the book, pushed into their faces as hard and as far as it will go...

That is the state of the law, it either is something that you can easily hurdle or it is something that is forcefully hurled against you...

Tue, 08/05/2014 - 07:19 | 5047952 RealityCheque
RealityCheque's picture

$650,000? Somewhere a manhattan hooker and drug dealer are wondering how they're going to make rent this week... 

Tue, 08/05/2014 - 08:36 | 5048084 d edwards
d edwards's picture

It is good to be a BIG donor and therefore a friend of the 0baMao regime!

Tue, 08/05/2014 - 08:40 | 5048106 AdvancingTime
AdvancingTime's picture

To say the market is rigged is an understatement. After over 30 years of trading commodities I will flat out state without any reservations that lies and manipulation run rampant. If you think anyone is looking out for the small independent trader you are wrong.

An unholy alliance of the Federal Reserve, the government, and the too big to fail has left the rest of us in a precarious position. For the big boys, its insider information and computer trading, this includes computing patterns that exploit where stops are placed, this improves their ability to wash the weak out of their positions. More on this subject in the article below.


Tue, 08/05/2014 - 09:29 | 5048335 mastersnark
mastersnark's picture

When I grow up, I want to be an investment bank.

Tue, 08/05/2014 - 10:48 | 5048773 yellowsub
yellowsub's picture

No different how independent auditors work with the company on fudging numbers than to provide a real service to the public...  

Tue, 08/05/2014 - 11:17 | 5048924 DerAdler
DerAdler's picture

These are the money-changers and usurers the Church had always warned about. The Church and Hitler were right about them.

Tue, 08/05/2014 - 11:22 | 5048957 DerAdler
DerAdler's picture

The only fine that would be fair at this point is the fine sharp blade of the guillotine coming down on these banksters' necks. That would be so fine.

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