Ex-JPMorgan precious metals traders sentenced to prison for fraud, manipulation, spoofing

Rick Steves

Gregg Smith was an executive director and trader on JPMorgan’s precious metals desk in New York. Michael Nowak was a managing director and ran JPMorgan’s global precious metals desk.

The Department of Justice has announced that two former precious metals traders at JPMorgan Chase & Co., Gregg Smith and Michael Nowak were sentenced to two years in prison and a $50,000 fine and one year and one day in prison and a $35,000 fine, respectively.

Gregg Smith and Michael Nowak were found to have engaged in fraud, attempting price manipulation, and spoofing as part of a market manipulation scheme that spanned over eight years, involved tens of thousands of unlawful trading sequences and resulted in over $10 million in losses to market participants.

Some of the most powerful traders in the worldwide precious metals markets

Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division, said: “The defendants used their positions as some of the most powerful traders in the worldwide precious metals markets to engage in an egregious effort to manipulate prices for their benefit. This case reaffirms the Department’s steadfast commitment to hold accountable those who engage in fraud and manipulation that undermines the investing public’s trust in the integrity of our commodities markets.”

Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division, commented: “As today’s sentencing demonstrates, the FBI and its partners remain committed to investigating and bringing to justice anyone who attempts to manipulate our financial markets for their own selfish gain. In order to maintain economic security, investors in equity and commodities markets must have confidence that exchanges are operated in a transparent and equitable manner, and that investments are free from manipulation and fraud. Today’s outcome should serve as a reminder that the FBI remains highly focused on combatting bad actors conducting sophisticated fraud schemes targeting the securities and commodities markets.”

The court concluded that, between approximately May 2008 and August 2016, Smith and Nowak, along with other traders on the JPMorgan precious metals desk, engaged in a widespread spoofing, market manipulation, and fraud scheme.

Gregg Smith was an executive director and trader on JPMorgan’s precious metals desk in New York. Michael Nowak was a managing director and ran JPMorgan’s global precious metals desk.

JPMorgan paid over $920 million for wire fraud in 2020

The two traders placed orders for precious metals futures contracts that they intended to cancel before execution to drive prices on orders they intended to execute on the opposite side of the market. After tens of thousands of deceptive trading sequences for gold, silver, platinum, and palladium futures contracts on NYMEX and COMEX, both operated by CME Group, their manipulation scheme was detected.

In September 2020, JPMorgan admitted to committing wire fraud in connection with unlawful trading in the markets for precious metals futures contracts; and unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.

JPMorgan entered into a three-year deferred prosecution agreement through which it paid more than $920 million in a criminal monetary penalty, criminal disgorgement, and victim compensation, with parallel resolutions by the Commodity Futures Trading Commission (CFTC) and the Securities Exchange Commission.

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