Precious Metals Traders Guilty of Market Manipulation

Two former precious metals traders have been found guilty of spoofing futures markets in an Illinois court, while a third person facing charges has been acquitted.

Michael Nowak, who was head of JP Morgan’s global precious metals desk, and Gregg Smith, a trader on the New York desk, were found guilty of fraud, attempted market manipulation and spoofing, however, along with JPM salesperson Jeffrey Ruffo, were acquitted of potential more serious racketeering and conspiracy charges.

Following what was a three-week trial, Smith was convicted of one count of attempted price manipulation, one count of spoofing, one count of commodities fraud, and eight counts of wire fraud affecting a financial institution. Nowak was convicted of one count of attempted price manipulation, one count of spoofing, one count of commodities fraud, and 10 counts of wire fraud affecting a financial institution.

They are the latest precious metals traders to be convicted for, or who have pleaded guilty, to spoofing, last year two former Deutsche Bank traders were sentenced to one year and one day in jail, and several others, including two other JPMorgan traders admitted guilt and are awaiting sentencing. In September 2020, JP Morgan paid a $920 million fine as part of a deferred prosecution agreement over charges of unlawful trading.

The US Department of Justice, in giving evidence, argued that between May 2008 and August 2016, the defendants, along with other traders on the desk, placed orders that they intended to cancel before execution in order to drive prices into orders they intended to execute on the opposite side of the market. It argued the defendants engaged in thousands of deceptive trading sequences for gold, silver, platinum, and palladium futures contracts traded through the New York Mercantile Exchange (NYMEX) and Commodity Exchange (COMEX), which are both operated by CME Group.

“Today’s jury verdict demonstrates that those who seek to manipulate our public financial markets will be held accountable and brought to justice,” says assistant attorney general Kenneth Polite, Jr. of the DoJ’s Criminal Division. “With this verdict, the department has secured convictions of 10 former traders at Wall Street financial institutions, including JPMorgan, Bank of America Merrill Lynch, Deutsche Bank, The Bank of Nova Scotia, and Morgan Stanley. These convictions underscore the department’s commitment to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets.”

Assistant director Luis Quesada of the FBI’s Criminal Investigative Division, adds, “For years the defendants allegedly placed thousands of false orders for precious metals, creating a ruse that lured others into making disadvantageous trades. Today’s conviction demonstrates that no matter how complex or long-running a scheme is, the FBI is committed to bringing those involved in crimes like this to justice.”