Ex-JPMorgan traders face U.S. trial on racketeering charges

[July 08, 2022]    By Jody Godoy

(Reuters) - Three former JPMorgan Chase & Co employees face a U.S. federal trial in Chicago on Friday on accusations they helped turn their trading desk into a criminal enterprise that faked precious metals futures orders to manipulate prices.

The bank's former global precious metals desk head Michael Nowak, precious metals trader Gregg Smith and salesperson Jeffrey Ruffo are charged with racketeering and conspiracy in the U.S. Justice Department's most aggressive case to date targeting the manipulative trading tactic known as spoofing.

The tactic involves placing and then quickly canceling buy or sell orders to falsely create the impression of high demand or supply. The three men are accused of using the tactic to manipulate futures on metals such as gold, silver, platinum and palladium between 2008 and 2016.

Attorneys for the defendants did not reply to a request for comment on Thursday.

Spoofing was outlawed in 2010 when Congress passed the Dodd-Frank Act after the financial crisis. Since then, prosecutors have argued that earlier instances constituted fraud.

The racketeering statute, a federal law enacted in 1970 to take down the mafia, is rarely used to prosecute corporate crime. It allows prosecutors to charge a group of individuals, including those indirectly involved in alleged wrongdoing, on the basis they participated in a "criminal enterprise."

Better Markets, a Washington nonprofit that advocates for stronger financial regulation, called the case a "potential gamechanger" because the racketeering statute would allow prosecutors to seek harsh sentences if the defendants are convicted.

In addition to racketeering and conspiracy, Nowak faces 13 other charges including fraud, spoofing and attempted market manipulation, and Smith faces 11 additional charges.

Christopher Jordan, a trader who left JPMorgan in 2009, has also been charged and will be tried separately.

The trial before a jury is expected to take around five weeks. Prosecutors are expected to call three former traders as cooperating witnesses, all of whom have separately pleaded guilty to related charges. Alleged victims of the scheme may also take the stand, according to court papers.

Commodities manipulation and in particular spoofing have become a major focus of the Justice Department, which has brought several other cases in recent years, including against NatWest and former traders at Deutsche Bank and UBS.

JPMorgan also agreed in 2020 to pay more than $920 million and admitted to wrongdoing to settle with the DOJ and Commodity Futures Trading Commission over the conduct of the traders who have pleaded guilty or are facing trial.

(Reporting by Jody Godoy; Editing by Michelle Price and David Gregorio)

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