CFTC Orders JPMorgan to Pay Record $920 Million for Spoofing and Manipulation
Posted on 09/29/2020
The Commodity Futures Trading Commission (CFTC) issued an order filing and settling charges against JPMorgan Chase & Company (JPMC & Co.) and its subsidiaries, JPMorgan Chase Bank, N.A., and J.P. Morgan Securities LLC (JPMS) (collectively, JPM), for manipulative and deceptive conduct and spoofing that spanned at least eight years and involved hundreds of thousands of spoof orders in precious metals and U.S. Treasury futures contracts on the Commodity Exchange, Inc., the New York Mercantile Exchange, and the Chicago Board of Trade. This case is brought in connection with the Division of Enforcement’s Spoofing Task Force.
U.S. regulators are clamping down on spoofing, a market manipulation tactic which is hard to detect.
According to the press release, “The order finds that JPM’s illegal trading significantly benefited JPM and harmed other market participants. JPM is required to pay a total of $920.2 million—the largest amount of monetary relief ever imposed by the CFTC—including the highest restitution ($311,737,008), disgorgement ($172,034,790), and civil monetary penalty ($436,431,811) amounts in any spoofing case.”
Related Criminal and Civil Actions
The press release adds, “In a parallel matter, the Department of Justice’s Fraud Section and the United States Attorney’s Office for the District of Connecticut today announced entry of a Deferred Prosecution Agreement (DPA) with JPMC & Co., deferring criminal prosecution of JPMC & Co. on charges of wire fraud. Under the terms of the DPA, JPMC & Co. has agreed, among other things, to pay a criminal fine, disgorgement, and restitution.
In another parallel matter, the Securities and Exchange Commission (SEC) today announced entry of an order filing and settling charges against JPMS imposing both disgorgement and a civil monetary penalty. The CFTC order will recognize and offset any restitution and disgorgement payments made to the DOJ and the SEC.”
This case tracked that from at least 2008 through 2016, JPM, through numerous traders on its precious metals and Treasuries trading desks, including the heads of both desks, placed hundreds of thousands of orders to buy or sell certain gold, silver, platinum, palladium, Treasury note, and Treasury bond futures contracts with the intent to cancel those orders prior to execution. Through these spoof orders, the traders intentionally sent false signals of supply or demand designed to deceive market participants into executing against other orders they wanted filled. According to the order, in many instances, JPM traders acted with the intent to manipulate market prices and ultimately did cause artificial prices.
