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JPMorgan Chase & Co. (NYSE: JPM) and its subsidiaries agreed to the order of U.S. regulators requiring it to pay a total of $920 million to resolve charges that its traders practiced spoofing to manipulate the precious metals and Treasury securities markets.

The U.S. Department of Justice (DOJ), the Commodity Futures Trading Commission (CFTC), and the Securities Exchange Commission (SEC) conducted parallel investigations against JPMorgan and subsidiaries regarding its alleged manipulative trading practices.

On Tuesday, the three regulators announced that the multinational investment bank and financial services holding company entered into separate agreements to settle their allegations.

JPMorgan entered into a deferred prosecution agreement with the DOJ

According to the Justice Department, JPMorgan entered into a deferred prosecution agreement (DPA) in connection with the criminal information filed against it in the District of Connecticut,

In the criminal information, the DOJ charged the investment bank and financial services holding company with two counts of wire fraud—the first involving tens of thousands of instances of illegal trading on precious metals futures contracts and the second involving thousands of episodes of illegal trading of U.S. Treasury futures contracts and in the secondary market for U.S. Treasury bonds and notes.

Under the DPA, JPMorgan and its subsidiaries agreed to pay more than $920 million in penalties, disgorgements, and victim compensation. A portion of that amount particularly the civil monetary penalty will be paid to the CFTC.

Based on the admissions and court documents, a number of JPMorgan traders allegedly engaged in a fraudulent scheme related to the purchase and sale of gold, silver, platinum, and palladium futures contracts for eight years from March 2008 to August 2016. The traders on its precious metals desk allegedly practiced trading intended to deliberately trigger or defend barrier options held by JPMorgan to prevent losses.

Two JPMorgan traders on its precious metals desk already pleaded guilty to the charges filed against them by the Justice Department.

On October 9, 2018, John Edmonds pleaded guilty to one count of commodities fraud and one count of conspiracy to commit wire fraud, commodities fraud, commodities price manipulation, and spoofing.

On August 20, 2019, Christian Trunz pleaded guilty to one count of conspiracy to engage in spoofing and one count of spoofing in connection with his precious metals futures contracts trading at JPMorgan and other financial services firms.

Three former JPMorgan traders, egg Smith, Michael Nowak, and Christopher Jordan, and one former salesperson, Jeffrey Ruffo have been charged with racketeering conspiracy and other federal crimes over their alleged participation in the precious metals markets manipulation.

JPMorgan and its subsidiaries JPMorgan Chase Bank, N.A. (JPMC), and J.P. Morgan Securities LLC (JPMS) agreed to continue to cooperate with the Fraud Section and the U.S. Attorney’s Office for the District of Connecticut in any ongoing or future investigations and prosecutions as part of the DPA.

Acting Assistant Attorney General Brian Rabbitt of the DOJ's Criminal Division said, “Today’s resolution — which includes a significant criminal monetary penalty, compensation for victims, and requires JP Morgan to disgorge its unlawful gains — reflects the nature and seriousness of the bank’s offenses and represents a milestone in the department’s ongoing efforts to ensure the integrity of public markets critical to our financial system.”

J.P. Morgan Securities agreed to $35 million to settle SEC charges

J.P. Morgan Securities agreed to resolve allegations by the Securities and Exchange Commission (SEC) alleging that it engaged in fraudulent manipulative trading of U.S. Treasury securities for almost a year.

The New York-based broker-dealer, investment adviser, and a wholly-owned subsidiary of JPMorgan consented to the SEC Order requiring it to pay a total of $35 million including disgorgement of $10 million and a civil penalty of $25 million.

“Today’s resolution — which includes a significant criminal monetary penalty, compensation for victims, and requires JP Morgan to disgorge its unlawful gains — reflects the nature and seriousness of the bank’s offenses and represents a milestone in the department’s ongoing efforts to ensure the integrity of public markets critical to our financial system.”

JPMorgan and its subsidiaries settle with CFTC over its alleged massive spoofing

According to the CFTC, JPMorgan, JPMorgan Chase Bank, and J.P. Morgan Securities agreed to pay monetary relief to resolve its allegations against the companies.

The CFTC alleged that JPMorgan and its subsidiaries engaged in deceptive conduct and massive spoofing to manipulate the precious metals and Treasury securities markets to obtain unlawful profits.

The companies agreed to pay $920 million under its DPA with DOJ, which includes a civil monetary penalty of approximately $436.4 million, restitution of around $172 million, and disgorgement of $311.7 million.

CFTC Chairman Heath Tarbert said, “Spoofing is illegal—pure and simple. 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.”

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