Recently, the "gold and silver manipulation case" of JPMorgan Chase, which shocked the world, has made important progress.
On August 10, EST, according to the official website of the U.S. Department of Justice, after three weeks of trial and eight days of deliberations, the Chicago federal jury convicted Michael Nowak, former head of JPMorgan Chase's global precious metals division, and precious metals trader Gregg Smith for cheating and telecommunications fraud, and ruled that he used misleading orders to manipulate prices.
It is reported that this scam allowed JPMorgan Chase to make a huge profit, but investors suffered huge losses.
Prosecutor: The main culprit "has the ability to manipulate the global gold price"
According to the China Fund News, according to the U.S. Department of Justice website, U.S. District Court Judge Edmond Chang said Nowak and Smith will be sentenced next year, and everyone can.
The case is the largest of its kind in the U.S. Judiciary to date. The case alleges that JPMorgan's precious metals business was a criminal enterprise operation. The evidence provided by prosecutors "surfaced" the business's inner workings, with information such as transactions, chats and testimony from former colleagues revealing how Smith and Nowak pushed precious metal prices up and down for profit.
According to China Securities News, according to the U.S. Department of Justice, the jury convicted Nowak and Smith on multiple charges including price manipulation, deception, wire transfer fraud and more.
Among them, Smith was convicted of one count of attempted price manipulation, one count of deception, one count of commodity fraud and eight counts of wire fraud affecting financial institutions, for a total of 11 counts; Nowak was convicted of one count of attempted price manipulation, one count of deception, one count of commodity fraud and ten counts of wire fraud affecting financial institutions, for a total of 13 counts. In addition, Jeffrey Ruffo, a former executive director of JPMorgan Chase and head of hedge fund sales, was acquitted.
According to media reports, Nowak used to be the most vocal person in the bullion market, he "owns some of the largest hedge fund clients" and often dominates the order flow for precious metals futures.
In his closing statement, prosecutor Avi Perry said, "They have the ability to drive the market, they have the ability to manipulate the global gold price." ”
The use of "deception" is very profitable
According to foreign media reports, the convictions of Smith and Nowak are the climax of the US Department of Justice's seven-year crackdown on fraudulent trading in the futures market , spoof trading activities. Prosecutors say the U.S. Congress declared "spoofed" deals illegal in 2010, which were so prevalent on Wall Street that they persisted even after they were banned.
In short, "deception" refers to the act of false quotations and then withdrawing orders in stock market or futures market trading: that is, placing orders first and then canceling orders, thereby affecting the price. "Scammers" influence the market by pretending to be intent on buying or selling at a specific price, creating the illusion of demand, and trying to lure other traders into trading. Through this "deception" behavior, the "pretender" can buy or sell at a new price and thus make a profit.
After an investigation by the U.S. Commodity Futures Trading Commission, from 2008 to 2016, JPMorgan Chase & Co. entered into a large number of gold, silver, platinum, palladium, Treasury and Treasury futures contracts through a number of dealers on the precious metals and Treasury bond trading platform (including the heads of the two trading desks) and cancelled these orders before executing the transaction.
In this case, prosecutors accused Smith and Ruffo of employing an illegal trading strategy while working, having traded multiple orders at different prices on multiple occasions, but these orders were far larger than the actual orders, known as "stratified manipulation."
Prosecutors' documents indicate that Smith has executed about 38,000 stratified manipulation trades over the years; Nowak, who specializes in options trading, tried stratified trading in September 2009 and has since made about 3600 manipulative trades. In addition, Ruffo needs to tell Smith where it should enter the market and then go and operate orders from at least two hedge fund clients.
Prosecutors said such practices were widespread, with JPMorgan traders having committed more than 50,000 fraudulent acts in the last decade.
According to the China Fund News, the FBI quoted JPMorgan Chase and Co. in court as saying that employee compensation was tied to performance. From 2008 to 2016, Nowak made a cumulative profit of $186 million for the company, Smith about $117 million, and Ruffo $70.3 million, according to the data. From 2008 to 2016, Nowak's personal compensation was $23.79 million, and Smith and Ruffo's personal compensation was $9.9 million and $10.5 million, respectively.
It is worth mentioning that in September 2020, JPMorgan Chase had admitted to transaction fraud and paid a record fine of $920 million.
In September 2020, JPMorgan admitted to committing fraud in the following areas: First, illegal trading in the precious metals futures contract market; Illegal transactions in the U.S. market, including U.S. Treasury futures contracts and the U.S. secondary (cash) market.
JPMorgan has since agreed to pay a record $920 million to settle an investigation by the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC) into its alleged manipulation of global metals and U.S. Treasury markets through "deception."
According to a statement released by the CFTC, this is the largest fine issued by the agency for swindling this market manipulation. The $920 million includes $436.4 million in fines, $311.7 million in damages, and more than $172 million in illegal gains.
Mainland law explicitly prohibits acts such as "deception"
The mainland explicitly prohibits market wrongdoing such as pretense and deception.
The Futures and Derivatives Law of the People's Republic of China, which came into effect on August 1 this year, clearly prohibits "frequent or large-scale declarations and withdrawal of declarations for the purpose of not trading".
Among them, Article 6 stipulates that futures trading and derivatives trading activities shall comply with laws, administrative regulations and relevant national provisions, follow the principles of openness, fairness and justice, and prohibit fraud, market manipulation and insider trading.
Article 12 stipulates that no unit or individual may manipulate the futures market or the derivatives market. It is forbidden to manipulate the futures market by influencing or intending to affect the futures trading price or futures trading volume by the following means, including "frequent or large-scale declarations and withdrawal of declarations without the purpose of transactions".
Article 20 stipulates that if a trader entrusts a futures business institution to conduct a transaction, he may issue trading instructions in writing, by telephone, at a self-service terminal, on the Internet, etc. Trading instructions should be clear, specific and comprehensive.
Article 21 stipulates that where a transaction is carried out programmatically through the automatic generation or issuance of trading instructions through computer programs, it shall comply with the provisions of the Futures Supervision and Administration Agency under the State Council and report to the futures trading venue, and shall not affect the safety of the futures trading venue system or the normal trading order.
Daily economic news is synthesized from China Securities News, China Fund News, etc