JPMorgan Chase & Co. (NYSE: JPM) is reportedly close to reaching a settlement agreement, in which it could pay almost $1 billion to end investigations into its alleged manipulation of precious metals and Treasury securities markets
The U.S. Commodity Futures Trading Commission (CFTC), Department of Justice (DOJ), and the Securities and Exchange Commission (SEC) are investigating whether JPMorgan’s traders rigged the precious metals and Treasury securities markets using spoofing.
Spoofing is a scheme in which traders place a large order to buy or sell a bond, futures contract, or stock but they have no intention of executing it. These traders or spoofers disseminate false or misleading information to trick other market participants into reacting to artificial change and imbalance in supply and demand, moving prices in their desired direction.
The potential settlement will resolve the CFTC, DOJ, and SEC investigations. The federal regulators are expected to announce their agreement with JPMorgan this week, according to Bloomberg based on information from three people familiar with the matter.
A penalty that is almost $1 billion would be a record settlement for spoofing-related market manipulation charges.
JPMorgan expected to admit wrongdoing in the settlement
Last month, the Bank of Scotia (operating as Scotiabank) agreed to pay a total of $127.4 million to resolve the CFTC and the DOJ’s complaint alleging that it engaged in massive spoofing in gold and silver futures contracts for more than eight years. The CFTC originally penalized the Canadian bank in 2018 for spoofing in the precious metals markets.
There is a possibility that the federal regulators will force JPMorgan to admit wrongdoing, according to one of the people familiar with the settlement negotiations.
Prosecutors filed charges against JPMorgan in September last year. The 14-count criminal indictment detailed how its traders conspired to manipulate the precious metals markets and defraud customers for almost a decade.
The indictment named Michael Nowak, a former managing director who headed the global precious metals desk of JPMorgan as a defendant. Gregg Smith and Christopher Jordan, both former executive directors and traders on the firm’s precious metals desk were also named as defendants in the cases. There were also eight un-identified co-conspirators in the indictment.
Nowak and three of his fellow defendants in the case pleaded not guilty and they are seeking dismissal of the allegations against them. Two other defendants pleaded guilty to conspiracy charges and are cooperating with the federal regulators.
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