JPMorgan to pay over $920 m to settle market manipulation probes in US

Hemani Sheth Mumbai | Updated on September 30, 2020 Published on September 30, 2020

JPMorgan JPM Chase & Cohas agreed to pay over $920 million in a settlement against federal investigations into United States market manipulation, admitting misconduct related to manipulation of precious-metals and Treasury markets, US authorities said on Tuesday.

The fine will settle investigations by the Justice Department, Commodity Futures Trading Commission and the Securities and Exchange Commission.

The Commodity Futures Trading Commission (CFTC) on Tuesday issued the order to settle the charges against JPMorgan Chase & Company (JPMC & Co) and its subsidiaries, JPMorgan Chase Bank and JP Morgan Securities (JPMS) (collectively, JPM).

It was charged with “manipulative and deceptive conduct and spoofing that spanned at least eight years and involved hundreds of thousands of spoof orders in precious metals and US Treasury futures contracts on the Commodity Exchange, the New York Mercantile Exchange, and the Chicago Board of Trade”.

The company is required to pay $920.2 million in total, a record settlement by the CFTC. The company will pay over $436.4 million as a civil monetary penalty, over $311.7 million in restitution and over $172 million in disgorgement.

According to an official release by the CFTC, JPM had placed hundreds of thousands of orders “to buy or sell certain gold, silver, platinum, palladium, Treasury note, and Treasury bond futures contracts” from at least 2008 through 2016. This was part of a market manipulation practice called ‘spoofing’. These orders were placed with the intention to cancel them before execution, through numerous traders on its precious metals and Treasuries trading desks.

Manipulates prices

At multiple occasions, JPM traders placed these orders to manipulate market prices and were ultimately successful in causing artificial prices.

“Spoofing is illegal – pure and simple,” said CFTC Chairman Heath PTarbert. “This record-setting enforcement action demonstrates the CFTC’s commitment to being tough on those who intentionally break our rules, no matter who they are. Attempts to manipulate our markets won’t be tolerated.”

“This action sends the important message that if you engage in manipulative and deceptive trade practices you will be caught, punished, and forced to give up your ill-gotten gains,” added Division of Enforcement Director James McDonald.

The order also held JPMS guilty of falling to “identify, investigate, and stop the misconduct”.

“Despite numerous red flags, including internal surveillance alerts, inquiries from CME and the CFTC, and internal allegations of misconduct from a JPM trader, JPMS failed to provide supervision to its employees sufficient to enable JPMS to identify, adequately investigate, and put a stop to the misconduct,” the order said.

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Published on September 30, 2020
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