CHICAGO (BLOOMBERG) - The former head of the JPMorgan Chase & Co precious-metals business and his top gold trader were convicted in Chicago on charges they manipulated markets for years, handing the United States government a win in its long crackdown on bogus "spoofing" orders.
Michael Nowak and Gregg Smith were found guilty on Wednesday (Aug 10) by a federal jury after a three-week trial and more than eight days of deliberations. Prosecutors presented evidence that included detailed trading records, chat logs and testimony by former co-workers who "pulled back the curtain" on how Nowak and Smith moved precious-metals prices up and down for profit from 2008 to 2016.
A salesman on the desk, Jeffrey Ruffo, was acquitted of charges he participated in the conspiracy.
The case was the biggest yet by the US Justice Department, which alleged the precious-metals business at JPMorgan was run as a criminal enterprise. Nowak, the managing director in charge of the desk, and Smith, its top trader, were convicted of fraud, spoofing, market manipulation.
"They had the power to move the market, the power to manipulate the worldwide price of gold," prosecutor Avi Perry said during closing arguments.
Nowak and Smith will be sentenced next year. Each faces decades in prison, though it may be far less. Two Deutsche Bank traders convicted of spoofing in 2020 were each sentenced to a year in prison.
JPMorgan, the largest US bank, agreed in 2020 to pay US$920 million (S$1.26 billion) to settle spoofing allegations against it, by far the biggest fine by any financial institution accused of market manipulation since the financial crisis.
The criminal case against some of the biggest players in the precious-metals markets was closely watched. Spoofing became illegal with the passage of the Dodd-Frank Act in 2010.
"It's something that's been on the minds of many people that were involved in the precious-metals markets in that point in time, and I would say this verdict closes a chapter," said Phil Streible, the chief market strategist at Blue Line Futures. "This kind of thing had been going on for at least 15 years or more with people waiting for justice, and I never thought it would ever get closed."
Dennis Kelleher, co-founder and Chief executive officer at Better Markets, an organisation advocating stricter financial regulation, said the verdict "should signal to Wall Street's biggest financial firms and executives that they are not above the law."
