Precious Metals Spoofers Jailed in US
Posted by Colin Lambert. Last updated: August 24, 2023
Two former JP Morgan precious metals traders have been jailed in the US after being found guilty of spoofing precious metals markets over a period of eight years on both the NYMEX and COMEX exchanges.
The two men, Michael Nowak, former head of JP Morgan’s global precious metals desk, and Gregg Smith, a trader on the New York desk, were found guilty of spoofing and price manipulation by an Illinois court last year, although they were acquitted of more serious charges of racketeering and conspiracy.
The spoofing, which took place between 2008 and 2016, followed the usual pattern of larger orders being placed down the stack on one side of the market, to push the market into a smaller order at top of book on the other side. “These deceptive orders were intended to inject false and misleading information about the genuine supply and demand for precious metals futures contracts into the markets,” the US Department of Justice says.
Smith actually received the harshest sentence, he was sentenced to two years in prison and a $50,000 fine. Nowak was sentenced to one year and one day in prison and a $35,000 fine. In 2020, JP Morgan entered a three year deferred prosecution agreement and paid a $920 million fine in association with this case and an unrelated case in the US Treasury market.
“The defendants used their positions as some of the most powerful traders in the worldwide precious metals markets to engage in an egregious effort to manipulate prices for their benefit,” says acting assistant attorney general Nicole Argentieri of the Justice Department’s Criminal Division. “This case reaffirms the department’s steadfast commitment to hold accountable those who engage in fraud and manipulation that undermines the investing public’s trust in the integrity of our commodities markets.”
Luis Quesada, assistant director of the FBI’s Criminal Investigative Division, adds, “As today’s sentencing demonstrates, the FBI and its partners remain committed to investigating and bringing to justice anyone who attempts to manipulate our financial markets for their own selfish gain. In order to maintain economic security, investors in equity and commodities markets must have confidence that exchanges are operated in a transparent and equitable manner, and that investments are free from manipulation and fraud.
“Today’s outcome should serve as a reminder that the FBI remains highly focused on combatting bad actors conducting sophisticated fraud schemes targeting the securities and commodities markets,” he warns.