The latest news in the gold trading market in November is the admission of guilt for manipulating the gold market by another gold market trader. This got everyone up in arms about how gold was manipulated from $1,921 to $1,040 between 2011 and 2015 to benefit the trader and the few people who were in on the scam.
However what the trader did has been compared to someone causing a paper cut. If that was to happen it means that this paper cut would have caused the market to bleed profusely but this isn’t what happened. There were no major rumblings and probably a lot more people were doing what he was doing at that time. What the trader plead guilty to is called “spoofing” which in the trading world is a strategy that involves injecting false and misleading information by placing “spoof” or non-existent data that would make it look like demand for gold was higher than the supply. Bogus orders were signed to move the price of gold in favour of the trader and the bank.
John Edmonds, a 36 Year old, former JP Morgan Chase trader had been with the bank for over 13 years. According to him, the practice of spoofing gold orders was wide spread within the bank. It was something he learnt to do at JPMorgan Chase for years. Edmonds states that he worked at JPMorgan from 2004 to 2017. He rose from being an analyst to becoming a vice-president during that period. This is no easy feat in a company like that so Edmonds must have been exceptionally good at his job. Between 2009 and 2015 he was involved in the development of a proprietary e-trading platform. This is also the time frame during which most of the spoofing activities were taking place.
Spoofing appears to be a common practice that not only affects the gold market, but Edmond’s admitted to doing the same with other precious metals like silver and platinum futures contracts traded on exchanges. Many silver investors who buy silver know about practice. This revelation is the latest in a series of actions by the commodity futures trading commissions and the US Justice department to uncover the extent of spoofing and other illegal activities in the commodities trading market. JPMorgan Chase has yet to answer for itself, but Edmond has implicated the company and several key people within the bank. He is charged with one count of commodities fraud, conspiracy to commit wire fraud, spoofing and price manipulation.
JPMorgan which happens to be the world’s biggest investment bank by revenue isn’t the only bank that was being investigated by the Commodity Futures Trading Commission. In January Investigations by the CFTC resulted in UBS, Deutsche Bank and HSBC being hit with a total of $46.6 million of civil fines for spoofing.
Edmonds no longer works for JPMorgan but he is cooperating with the authorities to shed light on the illegal activities that went on when he worked at JPMorgan. He entered his guilty plea on the 9th October 2018. Sentencing is scheduled to take place on the 19th of December. For his actions, Edmonds is facing 30 years in prison, but will likely get less than that because of his cooperation with the FBI’s investigation. This is not the first time JP Morgan has had lawsuits filed against it for precious metals manipulation in 2010 and 2011 a lawsuit was filed against JP for silver manipulation. The judge dismissed the case, however JP was back to its usual tricks a few years later. Many silver investors who buy silver were following this case with the expectation of rising silver prices. However, due to the dismissal of the case this prediction did not come to fruition.