“New York. Oct. 27 (Reuters) - JPMorgan Chase & Co. (JPM.N) and HSBC Holdings Plc (HSBA.L) were hit with two lawsuits on Wednesday by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars of illegal profits.
“The banks, among the world’s largest, were accused of manipulating the market for COMEX silver futures and options contracts from the first half of 2008 by amassing huge short positions in silver futures contracts that are designed to profit when prices fall.
“‘Defendants reaped hundreds of millions of dollars, if not billions of dollars in profits’ from the conspiracy, one of the complaints said.”
Apparently this lawsuit was waiting in the wings in case of action by the Commodity Futures Trading Commission who regulate the futures market. On the day prior to its filing CFTC Commissioner Bart Chilton came out with the following statement.
“Washington (Dow Jones) - A federal futures regulator said Tuesday he believes there have been numerous attempts to fraudulently influence silver market prices, and he urged the agency to prosecute those who may have violated commodities laws.
“Bart Chilton, a commissioner at the Commodity Futures Trading commission, made his comments Tuesday at the start of a public meeting where the agency will be proposing new rules to strengthen its anti-fraud and anti-manipulation powers.
“The agency’s enforcement division for over two years now has been probing the silver market amid a flurry of complaints by investors who have raised fears about potential price manipulation. The CFTC hasn’t provided any updates on the investigation, and Chilton said he thinks ‘the public deserves some answers to their concerns that silver markets are being, and have been, manipulated.’
“‘I believe there have been repeated attempts to influence prices in the silver markets,’ he said. ‘There have been fraudulent efforts to persuade and deviously control that price.’”
In my opinion, Mr. Chilton serves as a stalking horse for Gary Gensler the new CFTC chairman. All this has come about because of the determined efforts of Theodore Butler to attack what he describes as a manipulative short position in COMEX silver. Fortunately, for silver investors Mr. Butler’s complaints no longer fall on deaf ears. Soon after becoming chairman at the CFTC, Mr. Gensler was smart enough to see that Mr. Butler was correct. However, overcoming the lethargy in his agency required patience and skill. Mr. Chilton’s remarks coming before the lawsuit keep him and his agency ahead of the curve and probably free of future criticism.
The magnitude of these revelations cannot be underestimated. In effect the CFTC has sent a message that senior staff members agree with Mr. Butler’s allegations. The private lawsuit parrots Mr. Butler’s arguments as if it were written by him. Once again Mr. Butler has proven his merits as an analyst of the silver market. He is the moving force behind these events which are historical in nature. We expect his fame to grow.