In Ted Butler's Archive


The big news of the week was a surprising announcement yesterday. The CFTC issued an order and simultaneous settlement of a case involving manipulation of gold and silver prices on the COMEX. I believe this announcement to be of the utmost significance.

For the first time in history, the Commodity Futures Trading Commission has brought charges against someone for manipulating the gold and silver markets exactly in the manner I have described for decades. This is so astounding on its face, that I hardly know where to begin. I am writing this less than 24 hours after reading the announcement, so I reserve the right to alter my opinion as time evolves. You can read the order at:

The agency brought these charges against a former junior trader of an unnamed foreign bank (said to be Deutsche Bank). The price manipulation occurred during the time of the CFTC’s infamous five-year formal silver investigation. You’ll remember that the original investigation by its Enforcement Division previously concluded that there were no manipulation charges worthy of pursuing. Clearly, something changed the CFTC’s mind. Also, please note that all the alleged price manipulation took place on the cesspool known as the COMEX and not on any of the foreign exchanges often bandied about.

Further, as the press release makes clear, this is no one-off by the agency. The press release reads more like an open solicitation for others to step forward to provide information pertaining to COMEX gold and silver futures manipulation. I don’t know what I am more shocked by – the announcement of manipulation in COMEX gold and silver futures or the apparent intent by the Commission to pursue this further.

Two months ago, I took the occasion of two new appointments at the CFTC to petition the agency again to intervene in the ongoing silver manipulation and I also asked others to write in as well. I think hundreds of readers took the time to write to the agency. Unless I’m misreading what is occurring, our efforts may have finally paid off. If you read the CFTC’s press release, you’ll note that the official quoted is James McDonald, the new Director of the Enforcement Division, one of the officials we wrote to. I also send McDonald all my articles, as I have always done with past Enforcement Directors.

Not for a minute do I think that the case against the junior trader was initiated after McDonald’s appointment, as such cases necessarily involve long lead times. What I am suggesting is that this announcement would have never taken place were it not for McDonald. That’s because the announcement was not in keeping with prior agency findings. Some may ask why the CFTC is going after junior level traders when the crime of manipulation is as institutional as it gets. This looks quite measured and deliberate.

If you read the announcement, I hope you are struck by the description of what the junior trader is alleged to have done and the similarity to what I frequently allege. The order didn’t reference managed money technical funds being snookered by the commercials, yet that is exactly what the junior trader is accused of. The announcement even uses the word “induced” to describe the intent of the spoofing and fake price signals, same as the words I use regularly. There is little doubt in my mind that the announcement is a “shot across the bow” for the institutional manipulators, like JPMorgan and Bank of Nova Scotia. Going after the little fish is a way of telling the big manipulators that the jig is up.

I’m convinced that Mr. McDonald and the agency now realize things have gone too far and it’s time to try to arrange the best outcome possible. Having missed it all these years, the options still open to the agency are now quite limited. The best alternative for the CFTC may be to signal to the big manipulators, like JPMorgan, that the game is up and let the crooked commercials on the COMEX resolve matters for themselves so that the agency can pretend the manipulation is unwinding of its own accord. This way the CFTC can maintain the cloak of deniability and finally end a completely broken price discovery process that has now come to infect other important markets.

Besides, how does the Commission get around the secret and illegal agreement made between JPMorgan and the U.S. Government when the bank rescued Bear Stearns in 2008? The simple answer is by an end run. Whatever that agreement entailed, it was never intended to last in perpetuity. Nine years of looking the other way is long enough. Perhaps the only way to demonstrate to the big COMEX commercial crooks that enough is enough is to do what the CFTC just announced – a deepening investigation into the COMEX silver manipulation as fair warning to end the scam.

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