In Ted Butler's Archive


By now, it would be hard not to have read about the Justice Department’s landmark criminal indictments against three additional precious metals traders from JPMorgan. Two of the traders charged are current employees and include the head of global metals trading. The charges include spoofing and market manipulation that extend back for nearly a decade. In a very serious turn, the Justice Department invoked the Racketeering and Corrupt Organizations Act (RICO) and referred to the pattern of wrongdoing at JPMorgan as that of a criminal enterprise.  These new charges validate virtually everything I have alleged about JPMorgan for more than ten years to the point where a subscriber quipped that the DOJ was plagiarizing my work.

I have been reporting on the silver manipulation for 35 years. I started after discovering in 1985 that concentrated short selling on the COMEX futures market was the reason for the low price. For the past 11 years, I’ve reported that JPMorgan became the kingpin of the silver manipulation when it acquired Bear Stearns in 2008. I’ve been careful to make my findings as open as possible, including sending everything I’ve alleged to JPMorgan; the CME Group; the federal commodities regulator, the CFTC; and recently the Justice Department.

If any of the serious accusations I’ve leveled at JPMorgan were untrue, it’s likely they would have sued me. To date, none of these entities have objected or disagreed with my allegations, which involve the most serious market crime possible – price manipulation. In fact, a former commissioner of the agency, Bart Chilton, gave an interview shortly before his recent untimely passing basically confirming the allegations I’ve made about JPMorgan.

In March 2008, JPMorgan wasted no time in asserting its control of silver prices and drove prices down from $21 to $9 by the end of that year. JPMorgan closed out a significant chunk of its short positions, earning profits in the hundreds of millions. From that point on, JPMorgan perfected the strategy of selling short enormous quantities of COMEX futures contracts to cap price rallies and to buy back those short sales when prices fell. So successful was JPMorgan that it never once took a loss, only profits.

Conditions in the physical silver market began to change by the fall of 2010. A pronounced physical tightness began to creep into the market, largely the result of investment buying in silver ETFs (exchange traded funds). This buying required the deposit of physical metal. The largest silver ETF, SLV, experienced an inflow of 60 million physical ounces from the fall of 2010 through April of 2011. This physical buying of silver caused prices to rise to almost $50 by May 1, 2011.

JPMorgan was unable to stop the price rally by the selling of short contracts. Such paper short sales are only effective against paper purchases, not physical buying. JPMorgan had no choice but to ride it out, suffering an open and unrealized loss of as much as $3 billion as silver prices approached $50 in April 2011. However, it did not rush to cover and buy back its silver shorts at a big realized loss and instead rode it out and worked to cause silver prices to fall sharply for what turned out to be the next 8 years.

In seeking to immunize itself from ever again being in the precarious position of being massively short in a silver price rally, JPMorgan conceived a brilliant solution. They began to buy enough physical silver (and gold) to never get hooked on the short side of COMEX futures again. The perfect solution was to buy enough physical silver to offset their big paper short position.

JPMorgan acquired the physical silver in a very slow and methodical manner, employing a variety of acquisition methods and always maintaining a tight control on price through excessive paper short sales. They suppressed the price when necessary. Not only was such a massive physical accumulation possible – it is exactly what I’ve been reporting for years.  JPMorgan has taken more than 8 years and used every acquisition method possible under the sun (COMEX futures deliveries, skimming off the weekly COMEX warehouse movement, acquiring American Eagle and Canadian Maple Leaf coins, SLV conversions), all while maintaining its role as the main COMEX short seller.

After accumulating enough physical metal to offset its COMEX paper short position, JPMorgan didn’t stop acquiring physical metal. They kept accumulating at the depressed prices of the past 5 years. This turned what was a brilliant defensive solution into perhaps the greatest money-making opportunity ever. All told, JPMorgan has accumulated 850 million ounces of silver at an average price of $18 per ounce and 25 million ounces of gold at an average cost of $1,200 per ounce.

It’s not necessary to put JPMorgan out of business to end the silver manipulation (no matter how justified that might be) and I would argue that might be the worst possible course for the Justice Department to follow. But not forcing JPMorgan to cease all new short selling in COMEX silver (and gold) might be just as bad. By its actions to date, as shown in Justice Department charging documents, JPMorgan has done nothing but abuse and undermine the integrity of our markets at every turn. To allow JPM to continue manipulating prices is unthinkable. Don’t put it out of business, just force JPMorgan to stop manipulating silver and gold prices by disallowing it to sell short.

As far as substantiating or refuting my allegations that JPMorgan has never taken a loss in COMEX trading and has accumulated massive amounts of physical metal, the Justice Department is uniquely qualified to ascertain whether this is true. CFTC concentration data from the Commitments of Traders report prove JPMorgan has never taken a loss, only profits in COMEX futures trading. As far as JPMorgan’s massive accumulation of physical metal, the Justice Department would have no problem in quickly establishing, with a few phone calls, the many ways JPMorgan has accumulated actual metal. The Department of Justice needs to stand up to JPMorgan and force it to cease and desist from manipulating metal prices through continued short sales. The DOJ doesn’t have to put JPMorgan out of business, it just needs to stop JPMorgan from future COMEX short sales. Once that happens, the price of silver will adjust upward towards its free market price. Under any circumstances, silver is grossly undervalued today and continues to offer a superb opportunity for gain. The ultimate price appreciation will be written about for years to come.

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