JPMorgan Chase agreed last week to settle an investigation into its practices by paying a settlement of $920 million.
The bank was accused of manipulating the precious metals market and the Treasuries market. The authorities claimed that JPMorgan Chase staff fraudulently rigged the markets tens of thousands of times between 2008 and 2016. By agreeing to pay penalties of nearly a billion dollars JPMorgan Chase tacitly concedes its complicity in a major fraud which was perpetrated for years.
Reports on the type of sly dealing undertaken by this pillar of the financial community are revealing. A trader who intended to sell an asset, say gold, would place a series of orders for the asset in order to create an illusion of elevated demand. The perception of rising demand would raise the trading price of the asset, which the trader would then sell, and then cancel the future orders he had used to lift the price.
This practice is referred to as ‘spoofing’ among asset traders. According to The Economist it was outlawed in the USA in 2010. But in the past two years spoofing charges against UBS, Merrill Lynch, Deutsche Bank and HSBC have all been settled by the accused banks paying penalties.
From the outside it seems astonishing to find out the practice was only made explicitly illegal in 2010. What have the financial authorities been doing for the last fifty years? It is not as if artificially manipulating prices is a new phenomenon for the capitalists.
It is hard for the banks to argue that these were the practices of a few rogue traders when the fiddling went on for years and occurred tens of thousand of times.
It is even more telling that the individuals who face prosecution under the RICO Act include the bank’s former head of precious metals trading.
By the way, the RICO Act, under which the individuals are being charged, stands for Racketeer Influenced and Corrupt Organisations, and was originally formulated to target organised crime. Draw your own conclusions.