Three JPMorgan Chase traders were accused by the Justice Department on Monday of masterminding a “massive,” eight-year scheme to manipulate international markets for precious metals like gold and silver.
From 2008 to 2016, Michael Nowak, Gregg Smith, and Christopher Jordan were involved in placing thousands of scam orders into the precious metals markets in order to “trick” rival traders into buying or selling with them, according to the criminal indictment from the DOJ.
The traders used an illegal tactic called “spoofing,” where they flooded markets with a mix of real and false orders to buy and sell futures contracts on the metals in order to give a false impression about the true supply and demand, according to the indictment.
For instance, on May 27, 2008 at 8:39 AM, Smith, of Scarsdale, NY, placed an order to sell seven silver futures contracts for $17.575, according to the indictment.
Twelve seconds later, Smith put out a fake order to buy 91 silver contracts at one to two pennies lower — making it look like the price of the metal was heading down, and his real offer was a good deal, the DOJ alleges.
Three second later, his real order was fulfilled, according to the indictment.
Nowak, 45, and Smith, 55, are still employed at the bank, but are reportedly on leave. Jordan, 47, left the bank in 2009.
“It’s truly regrettable that the DOJ decided to go forward with a prosecution of Mike Nowak, who has done nothing wrong,” Nowak’s lawyers, David Meister and Jocelyn Strauber, told The Post in a statement. “We look forward to representing him at trial and expect him to be fully exonerated.”
Jordan didn’t return a request for comment. A woman who picked up the phone at Smith’s Scarsdale home said he wasn’t available and declined to comment.
The case is being handled in Chicago federal court where CME Group, a futures trading exchange, is located. Smith will be presented Monday in White Plains federal court. Nowack, of Montclair, NJ, and Jordan, of Mountainside, NJ, will be presented Monday in Newark federal court.
A spokesman for JPMorgan, which is one of the largest banks for trading commodities like precious metals, declined to comment. The bank previously disclosed the investigation into its commodities trading in regulatory documents.
The three traders are also accused of layering the deceitful trades so they would be hidden from the CME Group and their bank, which is cooperating and has not been accused of wrongdoing.
The indictment intensifies pressure on banks for market manipulation.
In November, another JPMorgan trader, Jonathan Edmonds, pleaded guilty to spoofing charges.
Another trader, Christian Trunz, pleaded guilty to fraud charges and said he is cooperating with the DOJ.