Just two days after the DOJ took the unprecedented step of designating the JPMorgan precious metals trading desk as a "criminal enterprise" using unusually aggressive language which reminded legal experts of indictments utilizing the RICO Act, and which hopefully ended years of precious metal manipulation by the group formerly headed by Blythe Masters, CNBC now reports that the probe is set to spread significantly as Federal prosecutors and regulators "are expanding their already aggressive investigations of fraudulent precious metals trades at J.P. Morgan Chase to other U.S. markets and financial firms."
The inquiry into market manipulation of all kinds comes amid a spike in criminal prosecutions and civil actions in the past year involving so-called “spoofing” in the precious metals markets, which we now find had been taking place with reckless abandon for years at JPMorgan and virtually all other major banks.
The prosecutors broadened their investigation thanks to information received from traders questioned for spoofing-related charges, and as in most RICO cases, the information obtained from those traders has led to criminal charges against other individuals.
In short: what we for many years said was blatant manipulation of precious metals was precisely that, and now the participants in said manipulating cabal are being treated as a mafia syndicate by the DOJ.
The widening inquiry is being led by the Justice Department and the U.S. Commodity Futures Trading Commission as they continue their pursuit of individuals and firms for manipulating U.S. markets.
The crackdown may result in one of the biggest conviction rings for the DOJ since the financial crisis, with CNBC adding that the scope of the investigations has grown to the point where the criminal fraud division of the Justice Department expects to add personnel to the existing team to assist with the investigations and prosecutions of cases.
According to CNBC source, prosecutors now have an easier time identifying suspected spoofing due to advancements in the way the Department collects and analyzes trade data internally. Of course, they could have merely come to this site any time between 2009 and 2018 and observed the countless cases of blatant intraday gold and silver manipulation/spoofing which we pointed out, week after week.
CNBC further adds that prosecutors are using information about suspected spoofing to collect additional evidence against a trader and, if warranted, question that trader about their own conduct and that of others. So far, the increased focus on spoofing has resulted in federal prosecutors bringing a total of 13 spoofing cases against 19 defendants in the past five years. Of those, eight have pleaded guilty, while seven are fighting the charges and awaiting trial.
Following the indictment of three J.P. Morgan precious metals traders on Monday, Assistant Attorney General Brian Benczkowski said that the Justice Department is not finished with its probes.
“Our investigation is ongoing, and we’re going to follow the facts wherever they lead whether it is across desks here or at any other bank or upwards into the financial institution,” Benczkowski said.
At the same time, CFTC, the commodity regulator, has also been enhancing its own data analytic capabilities to detect spoofing and other suspicious activity in the markets, which makes sense considering that in 2013 the same CFTC found absolutely no evidence of manipulation in the silver market.
"Our goal is to build a really comprehensive data analytical capability — a complete set of data with the expertise to analyze all of it in each specific market so that we have a comprehensive ability to identify suspicious activity in any form it takes in any market it occurs in,” said the Director of the CFTC’s Enforcement Division James McDonald in an interview with CNBC.
McDonald used that knowledge when he moved to revamp the CFTC’s cooperation program. That effort has worked in tandem with the agency’s investment and development in data analytics.
“You can identify the person who executed the trade, but is there a supervisor or someone higher up the chain who may also have culpability?” McDonald said, explaining how to leverage data analysis with personal interviews of traders.
“It can be hard to go up the chain without having someone to tell you what is happening on the inside,” McDonald said.
We can only hope that this time the CFTC actually takes its job seriously, although at this point it is no longer lowly commercial traders who are manipulating gold but central bankers and the BIS itself, something we first reported years ago. We doubt regulators will go after central bankers with the same zeal they have been pursuing the small fish.