In Ted Butler's Archive


Last week’s announcement by the Department of Justice of a guilty plea by a former trader of JPMorgan for systemic “spoofing” and price manipulation of gold, silver, platinum and palladium traded on the COMEX and NYMEX futures exchanges (owned by the CME Group) seemed like a very big deal to me. The infractions occurred from 2009 to 2015 and the trader admitted to engaging in a conspiracy to commit market manipulation on hundreds of occasions, with the knowledge and consent of his immediate supervisors. I confess to a feeling of relief upon reading the complaint. It greatly reduces the chances of JPMorgan suing me for calling them crooks.

This is a criminal case which involves jail time and not a civil case which only involves monetary fines. The announcement also makes clear that this is an ongoing investigation. It’s hard to see how there won’t be further fallout for JPMorgan, since the guilty trader was doing what others were doing at the bank. It’s also hard for me to see how a trader involved in systemic criminal market activity in coordination with other traders at the bank doesn’t equate to criminal activity by the bank.

Spoofing is the blatantly manipulative practice of entering large orders and immediately cancelling those orders with the sole intent of artificially moving prices. As far as market crimes go, spoofing is lacking in any redeeming features, much like the mugging of old ladies. As much as the guilty plea points the finger at JPMorgan, it merely scratchers the surface. Spoofing and other short term illegal trading tricks are only tools used to enable the real price manipulation.

Spoofing sends prices through the moving averages and causes the technical funds to buy and sell on command. It’s the reason JPMorgan has never suffered a loss in trading COMEX silver and gold. The Justice Department is not seeing it because they don’t know enough to look for it. Similarly, I don’t believe that the DOJ knows that JPMorgan has accumulated massive amounts of physical silver and gold. (I will try to inform them again.)

The real manipulation involves the crooks at JPMorgan acquiring 800 million ounces of physical silver and 20 million ounces of physical gold at prices made artificially low by JPMorgan maneuvering the managed money traders into and out from positions on the COMEX. Yes, JPMorgan used spoofing as indicated in the plea deal to accomplish the maneuvering, but to leave it at spoofing is a miscarriage of justice. It’s like the police pulling over a serial killer and letting him go after citing him for a traffic violation.

As much as I am trying to not to get my hopes up that the DOJ discovers the real crime in silver and gold, I do confess to sensing a slight crack in the dike. Coupled with other things, like JPMorgan having now accumulated more physical silver and gold than I could have imagined a few years ago and the incredible physical movement in and out of the COMEX silver warehouses, it’s hard for me to see how there won’t be a resolution of the ongoing price manipulation.

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