US Launches Criminal Probe Into JPMorgan For Gold Price Manipulation

There was a time when the merest mention of gold manipulation in "reputable" media was enough to have one branded a perpetual conspiracy theorist with a tinfoil farm out back... and immediately banned from social media.

That was roughly coincident with a time when Libor, FX, mortgage, and bond market manipulation was also considered unthinkable, when High Frequency Traders were believed to "provide liquidity", or when the stock market was said to not be manipulated by the Fed, and when the ever-confused media, always eager to take "complicated" financial concepts at the face value set by a self-serving establishment, never dared to question anything.

That has now changed...

In November 2018, a former JPMorgan precious-metals trader admitted he engaged in a six-year spoofing scheme that defrauded investors in gold, silver, platinum, and palladium futures contracts.

John Edmonds, 36, of Brooklyn, New York, pleaded guilty under seal on Oct. 9 in the District of Connecticut to commodities fraud, conspiracy to commit wire fraud, commodities price manipulation, and spoofing. As Justice notes in a statement:

From approximately 2009 through 2015 John Edmonds engaged in a sophisticated scheme to manipulate the market for precious metals futures contracts for his own gain by placing orders that were never intended to be executed,” said Assistant Attorney General Benczkowski. 

“The Criminal Division is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets through spoofing or any other illegal conduct.”

That was followed, a year later, by the DOJ charging the entire precious-metals trading desk at JPMorgan of being deeply involved in what prosecutors described as a "massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants."

The DoJ charged Michael Nowak, a JPMorgan veteran and former head of its precious metals trading desk and Gregg Smith, another trader on JPM's metals desk, in the probe. (Blythe Masters was somehow omitted).

“Based on the fact that it was conduct that was widespread on the desk, it was engaged in in thousands of episodes over an eight-year period -- that it is precisely the kind of conduct that the RICO statute is meant to punish,” Assistant Attorney General Brian Benczkowski told reporters.

Here's where it gets extra interesting: according to Bloomberg, the unusually aggressive language language embraced by prosecutors reminds legal experts of indictments utilizing the RICO Act - a law allowing prosecutors to take down 'criminal enterprises' like the mafia by charging all members of the organization for any crimes committed by an individual on behalf of the organization.

Prosecutors charged the head of JP Morgan’s global metals trading operation and two other traders with "conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity" - language that is typically used to describe a RICO charge.

And now, 5 months later, Bloomberg reports that things have escalated even further.

According to two people familiar with the matter, Bloomberg reports that U.S. authorities that accused six JPMorgan Chase & Co. employees of rigging precious-metals futures are building a criminal case against the bank itself.

So more than 11 years after the farce began, this previously unreported investigation of the global bank’s parent company - part of a wide-ranging federal clampdown on market manipulation - raises the prospect of criminal charges and significant fines against America’s largest bank.

Additionally, Bloomberg notes that, according to a third person familiar with the matter, authorities are conducting a similar racketeering investigation of a second financial firm involving spoofing.

And all of this is occurring as more and more investors realize the value of gold as a hedge against the idiocy of politicians and policy-makers... in other words, just as manipulating precious-metals prices lower would be at its most use to the banking elites.

Conspiracy theory becomes conspiracy fact... and we wonder whether any of this would be public had Twitter's newly-minted "censor anything we don't like" policies been in place?