Traders Sentenced for Attempted Gold Market Manipulation

Two former precious metals traders at JPMorgan Chase & Co. were sentenced as part of a gold market manipulation scheme that spanned more than eight years, involved tens of thousands of unlawful trading sequences, and resulted in more than $10 million in losses to market participants.

Gregg Smith, 59, of Scarsdale, New York, was sentenced to two years in prison and a $50,000 fine. Michael Nowak, 49, of Montclair, New Jersey, was sentenced to one year and one day in prison and a $35,000 fine.

“The defendants used their positions as some of the most powerful traders in the worldwide precious metals markets to engage in an egregious effort to manipulate prices for their benefit,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division.

According to court documents, between approximately May 2008 and August 2016, Smith and Nowak, along with other traders on the JPMorgan precious metals desk, engaged in a widespread spoofing, market manipulation, and fraud scheme. Smith was an executive director and trader on JPMorgan’s precious metals desk in New York, and Nowak was a managing director and ran JPMorgan’s global precious metals desk.

As part of their market manipulation scheme, Smith and Nowak placed orders for precious metals futures contracts that they intended to cancel before execution to drive prices on orders they intended to execute on the opposite side of the market. Smith and Nowak engaged in tens of thousands of deceptive trading sequences for gold, silver, platinum, and palladium futures contracts traded through the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX), which are commodities exchanges operated by CME Group Inc. These deceptive orders were intended to inject false and misleading information about the genuine supply and demand for precious metals futures contracts into the markets.

In September 2020, JPMorgan admitted to committing wire fraud in connection with unlawful trading in the markets for precious metals futures contracts; and unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds. JPMorgan entered into a 3-year deferred prosecution agreement through which it paid more than $920 million in a criminal monetary penalty, which included criminal disgorgement and victim compensation.

As featured in Womp 2023 Vol 09 -