Gold and silver investors got a rare bit of good news on the enforcement front last week.
A trader from JPMorgan Chase pled guilty to rigging the precious metals futures markets.
John Edmonds admitted to cheating the bank’s clients and plenty of other people naive enough to expect fair treatment on the COMEX and other exchanges.
While this is by no means the first time a banker has been caught cheating, some aspects of this case are certainly worth noting.
Below is some detail on the who, what, when, why, and how of Mr. Edmonds’ activities at JPMorgan.
As part of his plea, Edmonds admitted that from approximately 2009 through 2015, he conspired with other precious metals traders at the Bank to manipulate the markets for gold, silver, platinum and palladium futures contracts traded on the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX), which are commodities exchanges operated by CME Group Inc.
Edmonds and his fellow precious metals traders at the Bank routinely placed orders for precious metals futures contracts with the intent to cancel those orders before execution (the Spoof Orders), he admitted.
This trading strategy was admittedly intended to inject materially false and misleading liquidity and price information into the precious metals futures contracts markets by placing the Spoof Orders in order to deceive other market participants about the existence of supply and demand. The Spoof Orders were designed to artificially move the price of precious metals futures contracts in a direction that was favorable to Edmonds and his co-conspirators at the Bank, to the detriment of other market participants.
In pleading guilty, Edmonds admitted that he learned this deceptive trading strategy from more senior traders at the Bank, and he personally deployed this strategy hundreds of times with the knowledge and consent of his immediate supervisors.
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