JPMorgan in talks to settle spoofing claims for $1bn

Payment and deferred prosecution agreement would resolve investigation by multiple US agencies

Laura Noonan, US Banking Editor

JPMorgan earlier this year said it faced allegations including ‘unjust enrichment and deceptive acts’ relating to trading of precious metals and Treasuries © JUSTIN LANE/EPA-EFE/Shutterstock

 

JPMorgan Chase is in advanced talks with US authorities to pay $1bn to settle allegations it manipulated metals and Treasuries markets using a technique known as spoofing, according to people familiar with the situation.

The proposed settlement would allow the bank to avoid prosecution over the alleged activities, one of the people familiar with the situation told the Financial Times.

Two former JPMorgan traders — Christian Trunz and John Edmonds — have already pleaded guilty to criminal charges of placing thousand of false orders to manipulate the prices of precious metals between 2007 and 2016.

JPMorgan’s former head of metals trading, Michael Nowak, and two other former traders and one ex-salesperson are contesting federal racketeering charges over their alleged role in what prosecutors described as a “massive multiyear scheme” to manipulate metals markets.

A settlement would end investigations by the Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission into the bank’s culpability for spoofing by its traders in gold, silver, other metals and US government bonds.

In its annual report published in April, JPMorgan said it was “engaged in discussions with various regulators” about allegations including “unjust enrichment and deceptive acts” relating to the bank’s trading of precious metals and Treasuries.

Two people familiar with the situation said that the settlement would not result in any restrictions on JPMorgan’s trading or operations. One of the people said the bank was negotiating a deferred prosecution agreement, which allows banks to continue with their activities as long as they fulfil certain conditions.

The $1bn figure for the size of the proposed payment was first reported by Bloomberg. 

JPMorgan declined to comment. The SEC declined to comment. The DoJ had no immediate comment. The CFTC did not immediately return a request for comment.

Criminal penalties for spoofing were introduced under the Dodd-Frank regulations that were brought in to clean up Wall Street after the 2008 financial crisis.

Other banks, including Deutsche Bank, UBS and HSBC have been fined for spoofing precious metals markets.

In the case of JPMorgan, the DoJ has alleged that Mr Trunz “learned to spoof from more senior traders, and spoofed with the knowledge and consent of his supervisors”.

When the charges against Mr Nowak and the other three traders were brought in 2019, Brian Benczkowski, then assistant attorney-general, said his department would “follow the facts wherever they lead . . . Whether it’s across desks or upwards into the financial system.”


Additional reporting by Kadhim Shubber

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