A federal jury in the Northern District of Illinois has convicted two former precious metals traders at JPMorgan Chase & Co. (JP Morgan) of fraud, attempted price manipulation and fraud in a multi-year market manipulation scheme. Covering eight years and thousands of illegal business sequences.
According to court documents and testimony, Greg Smith, 57, of Scarsdale, New York, was an executive director and trader on JPMorgan’s precious metals desk in New York. Michael Novak, 47, of Montclair, New Jersey, was a managing director and ran JP Morgan’s global precious metals desk.
Testimony at trial showed that between approximately May 2008 and August 2016, the defendants engaged in an extensive fraud, market manipulation and fraud scheme with other traders on the JP Morgan precious metals desk. The defendants placed the orders they intended to cancel prior to execution in order to increase prices on the orders they intended to execute on the opposite side of the market. Defendants New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. Engaged in thousands of deceptive trade sequences for gold, silver, platinum and palladium futures contracts traded through (COMEX), the commodity exchanges operated by CME Group Inc. These deceptive orders are intended to inject false and misleading information about the actual supply and demand of precious metals futures contracts into the markets.
“Today’s jury verdict demonstrates that those who seek to manipulate our public financial markets will be held accountable and brought to justice,” said Kenneth A. Pollitt, Jr., Assistant Attorney General of the Justice Department’s Criminal Division. “With this ruling, the Department has secured the convictions of ten former traders at Wall Street financial institutions, including JP Morgan, Bank of America/Merrill Lynch, Deutsche Bank, The Bank of Nova Scotia and Morgan Stanley. The Department’s commitment to prosecute those who undermine the investing public’s trust in the integrity of our commodity markets These crimes are emphasized.
“Over the years the defendants have placed thousands of false orders for precious metals, luring others into making unfavorable trades,” said Luis Quesada, Assistant Director of the FBI’s Criminal Investigative Division. “Today’s conviction demonstrates that the FBI remains committed to bringing those involved in such crimes to justice, no matter how complex or long-term a scheme.”
After a three-week trial, Smith was convicted of one count of price manipulation, one count of wire fraud, one count of commodity fraud and eight counts of wire fraud affecting a financial institution. Novak was convicted of one count of price manipulation, one count of wire fraud, one count of commodity fraud and 10 counts of wire fraud affecting a financial institution. Sentencing dates have not yet been set.
Two other former JPMorgan precious metals traders, John Edmonds and Christian Trunz, were previously convicted in related cases. In October 2018, Edmonds pleaded guilty in the District of Connecticut to one count of commodity fraud and one count of wire fraud, commodity fraud, price manipulation and conspiracy to defraud. In August 2019, Trunz pleaded guilty to one count of conspiracy to commit fraud and one count of fraud in the Eastern District of New York. Edmonds and Trunge await sentencing.
In September 2020, JP Morgan admitted to wire fraud in connection with: (1) illegal trading in the market for precious metals futures contracts; and (2) illegal trading in the markets for US Treasury futures contracts and the secondary (cash) market for US Treasury notes and bonds. JP Morgan entered into a three-year deferred prosecution agreement in which it paid more than $920 million in criminal monetary penalties, criminal disgorgement and victim compensation, announced the same day as parallel resolutions by the Commodity Futures Trading Commission and the Securities Exchange Commission. .
The FBI’s New York Field Office investigated the case. The Enforcement Division of the Commodity Futures Trading Commission assisted in this regard.
Market Integrity and Major Frauds Unit Head Avi Perry and trial attorneys Matthew Sullivan, Lucy Jennings and Christopher Fenton of the Criminal Division’s Fraud Unit are prosecuting the case.
Individuals who believe they may have been a victim in this case should visit the Fraud Division’s Victim Witness website for more information.