Libor May Be Manipulated, But Silver Is Not, CFTC To Conclude

In what may be the most amusing news of the day, according to the FT the CFTC will shortly drop its 4 year old investigation into silver manipulation, "after US regulators failed to find enough evidence to support a legal case, according to three people familiar with the situation." How about evidence to support an "illegal" case? Of course, that this is happening after the recent discovery that the world's most pervasive fixed income benchmark was manipulated for years, if not decades, can only be reason for laughter and wonder if the CFTC used the same assiduous diligence methods in pursuing the alleged perpetrators of precious metal manipulation as it did in letting the fraud at PFG slip through its fingers for two decades. We will probably never know, or at least not until an email mentioning bottles of Bollinger and silver price "fixing", (or "banging the close" for that matter) in the same sentence inexplicably turns up and makes a complete mockery of the CFTC yet again.

From the FT:

The Commodity Futures Trading Commission first announced that it was investigating “complaints of misconduct in the silver market” in September 2008, following a barrage of allegations of manipulation from a group of precious metals investors.


In 2010, Bart Chilton, a CFTC commissioner, said that he believed there had been “fraudulent efforts” to “deviously control” the silver price.


But after taking advice from two external consultancies, the first of which found irregularities on certain trading dates that it believed deserved more analysis, CFTC staff do not have sufficient evidence to bring a case, according to the people familiar with the situation.


The CFTC has analysed over 100,000 documents and interviewed dozens of witnesses since it began investigating the market in 2008, it said last year. The people familiar with the situation said the evidence included records from JPMorgan.


The conclusion of the investigation will come as a relief to JPMorgan. Although no company or individual was named in the CFTC investigation, the Wall Street bank has suffered a torrent of allegations from silver investors on the blogosphere.

The FT continues by referencing the inventor of CDS herself: Blythe Masters:

Blythe Masters, head of commodities at JPMorgan, in an April interview with CNBC conceded that there had been “a tremendous amount of speculation, particularly in the blogosphere, about this topic”, but maintained that the bank had no large bets on silver prices.


“We have no stake in whether prices rise or decline,” she said. JPMorgan declined to comment on the CFTC investigation.

What the FT did not mention is the end of that sentence pronounced in an interview on April 5 with CNBC which goes as follows:

"We have offsetting positions. We have no stake in whether prices rise or decline. Rather we're running a flat or relatively flat matched book.

Of course, the fact that a month later the firm's entire internal $350 billion hedge fund was found to be not only engaging in non-matched book trading, but suffered a humiliating $6 billion loss due to unmatched prop positions, should not influence all those who persist in perpetuating gross lies.

Which of course is why Masters' next sentence was the following:

"What is commonly out there is that JPMorgan is manipulating the metals market. It's not part of our business model. it would be wrong and we don't do it."

Courtesy of Gary Gensler's CFTC, who recently has managed to build up lots of goodwill courtesy of his masterful handling of both MF Global as well as PFG, we will never know whether she was also lying about this as well.

Finally, and tangentially, in the Libor scandal where not even the regulators can mask up years of gross manipulation, we learn that UBS fired dozens of people embroiled in the still evolving Lieborgate scandal, prosecution immunity notwithstanding:

UBS AG (UBSN) has dismissed about two dozen traders and managers in connection with an investigation of manipulation of the London interbank offered rates, Der Sonntag reported.


The Swiss bank terminated the traders for possible involvement in a fraudulent ring across several banks and the managers for not exercising controls or for boycotting an internal investigation, the newspaper reported today, citing an unidentified person familiar with the proceedings. Dominique Gerster, a spokesman at UBS, declined to comment on the report.

So let's get this straight: bankers, for their own selfish and financial reasons formed cabals and manipulated, with the complicity of central bankers, a market worth $500 trillion notional. But they left the one market which has the embedded systemic risk of impairing the perception of fiat, and the viability of the status quo system, untouched? And this despite JPM's implicit admission of guilt when it reduced it massive silver short position back in December 2010.

One could almost make this up.