JPMorgan Chase Pays nearly $1 Billion in Fines for Market Manipulation of Precious Metals and U.S. Treasuries

JPMorgan Chase & Co. agreed to pay over $955 million to settle civil and criminal charges over a scheme involving fake trades in precious metals and U.S. treasuries designed to manipulate the market in an effort to enhance the bank’s profits and cut losses. The multi-agency enforcement action was brought by the Commodity Futures Trading Commission (CFTC), the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). For nearly a decade, JPMorgan Chase & Co’s traders sitting in New York, London, and Singapore used spoofing to manipulate hundreds of thousands of transactions in precious metals futures markets, including gold and silver, as well as U.S. Treasury cash and futures markets.

The CFTC alone imposed a whopping $920 million fine, the largest ever imposed by the agency in a spoofing case, including nearly $312 million in restitution to harmed investors, $172 million in disgorgement of ill-gotten gains, and over $436 million in civil penalties. This record-setting action signals the CFTC’s resolute commitment to punish those who engage in manipulative and deceptive trading practices. The hefty fine also reflects the bank’s failure to prevent and cease the wrongdoing, as well as its failure to provide adequate cooperation to regulators in the early stages of the investigation.

Spoofing is a Form of Market Manipulation

Spoofing is a way to manipulate market participants. It occurs when a trader places a bid or offer, with the intent to cancel them right before execution, thereby creating an untrue picture of actual demand for or supply, ultimately resulting in artificial prices. Congress specifically outlawed spoofing in the futures and derivatives markets in 2010 following the financial crisis. The practice is also illegal in other countries, for example, the United Kingdom.

The CFTC and SEC pays rewards to whistleblowers with information about market manipulation

Spoofing is an example of illegal activity affecting market integrity that whistleblowers are often well-placed to uncover and bring to regulators’ attention. The CFTC’s Whistleblower Program and the SEC’s Whistleblower Program pays whistleblowers who provide information about possible violations of commodity, futures, securities and foreign corruption laws if their information helps the CFTC or SEC bring an enforcement action where over $1 million in monetary sanctions is ordered. Whistleblowers stand to receive between 10% and 30% of the amounts collected. The programs offer confidentiality, anti-retaliation protections, and you do not need to be an employee-insider to qualify for an award. Any person – regardless of their citizenship or residency, can file a whistleblower tip. Whistleblowers may receive more money if their information is also used in related actions brought by other regulators or authorities.

The CFTC and SEC have expressly recognized the key role whistleblowers play in rooting out fraud and corruption. Since issuing its first award in 2014, the CFTC saw nearly $100 million paid to whistleblowers by late 2019 allowing the agency to collect more than $800 million. The figures increased in 2020 with over $120 awarded to whistleblowers and close to $950 million recovered in connection with the information provided by whistleblowers. The SEC has been even more successful with nearly $2.5 billion in monetary sanctions, including over $700 million returned or scheduled to be returned to harmed investors. The latest data shows that the SEC has awarded over $562 million in whistleblower payouts since its first award in 2012.

The Whistleblower Team at Constantine Cannon is highly experienced in helping potential whistleblowers evaluate their claims. Thanks to the firm’s successful history partnering with enforcement agencies, our attorneys know how to provide effective assistance and counsel for whistleblowers both in the US and abroad. If you would like to know more or schedule a confidential consultation, please contact us to see how we can help.

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