JPMorgan Pays $920 Million to Settle Long-Running Spoofing Probes

JPMorgan Chase and two subsidiaries have reached a settlement agreement with US regulator to pay $920 million to resolve civil and criminal charges that its traders rigged precious metals and Treasury futures markets.

The record fine wraps up a long-running lawsuit that saw federal prosecutors at the Justice Department Fraud Section and top US regulators, the Commodity Futures Trading Commission and Securities and Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Commission, involved in the probes.

The spoofing lawsuit was originally filed against the US bank in 2015 by a hedge fund operator and two metals traders. At the time, JPMorgan denied the allegations and even managed to get the plaintiffs’ claims dismissed by a judge. However, the case was reopened in 2017 after four traders who had worked for the bank's metals unit were arrested and charged in the probe.

Christian Trunz, who worked at the bank’s London, Singapore, and New York offices, admitted conspiring with other gold, silver, platinum and palladium traders to place hundreds of buy or sell orders that he intended to cancel and not to execute at the time he placed the orders, a practice known as spoofing.

He pleaded guilty to two counts of conspiracy to commit wire fraud, agreed to meet with investigators and has been cooperating against unnamed co-conspirators, court records show.

The case was the latest in a series of prosecutions brought by US regulators as they have cracked down on spoofing. Trunz’s settlement followed the guilty plea by John Edmonds, another former trader at the bank in 2018.

The documents submitted to the court also paint a fairly concise picture of his overall tenure at the world’s biggest investment bank, outlining his interaction and contact with more experienced members of his trading team. In particular, the documents cite his supervision and interaction with more senior traders at the bank, which resulted in him being taught how to spoof from J.P. Morgan’s veteran traders.

“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 CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term — including the highest restitution ($311,737,008), disgorgement ($172,034,790), and civil monetary penalty ($436,431,811) amounts in any spoofing case,” the CFTC statement further explains.

Regulators and exchanges have stepped up their policing of spoofing in recent years. However, the people and firms they previously focused on were rather small-time avid gamers in markets. Earlier in January, regulators ordered Citigroup to pay a $25 million fine to settle charges as it had spoofed the Treasury futures market, the biggest spoofing settlement to date.

Spoofing, in general, is a practice in which a trader floods the market with fake orders by entering and quickly cancelling large buy or sell orders on an exchange, to fool other traders into thinking the market is poised to rise or fall. Though the tactic has long been used by some traders, regulators began clamping down on the practice only a few years ago.