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Michael Kern

Michael Kern

Safehaven

Michael Kern is a newswriter and editor at Safehaven.com, Oilprice.com, and a writer at Macro-Investing.com.

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Veteran JP Morgan Trader Caught In Market Manipulation Scandal

Gold

The plea deal of former veteran JP Morgan trader John Edmonds, who manipulated U.S. metals markets for six years, was officially opened on Tuesday—a month after he pleaded guilty—and he passes the buck to senior traders whom taught him everything he knows, and supervisors whom he alleges were fully aware of what he was doing, and consented. 

While Edmonds’ employer was not identified by prosecutors, Bloomberg quoted a source familiar with the case as saying that the defendant worked for New York-based JPMorgan at the time.

Step 1, according to Edmonds—learn from the best. As he pleaded guilty to one count of commodities fraud and one count of conspiracy to commit wire fraud, price manipulation and spoofing, Edmonds said that this wasn’t a one-man show.

From 2009 to 2016, Edmonds admitted to conspiring with other JP Morgan traders to manipulate the price of everything from gold and silver to platinum and palladium futures contracts on CME Group exchanges.

“For years, John Edmonds engaged in a sophisticated scheme to manipulate the market for precious metals futures contracts for his own gain by placing orders that were never intended to be executed,” said Assistant Attorney General Benczkowski. “The Criminal Division is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets through spoofing or any other illegal conduct.”

U.S. Attorney John H. Durham also noted that Edmonds was “involved in manipulating the precious metals commodity markets for several years”, and that “the investigation of deceptive trading practices by others involved in this scheme is going”.

The spoofing strategy that Edwards’ is going down for was “intended to inject materially false and misleading liquidity and price information into the precious metals futures contracts markets by placing the Spoof Orders in order to deceive other market participants about the existence of supply and demand,” according to the Justice Department. Related: Amazon’s Tale Of Two Cities

In other words, they artificially moved prices in their favor. 

Edmonds admitted to personally deploying this strategy “hundreds of times” with the knowledge and consent of immediate supervisors.

Edmonds is scheduled for sentencing on December 19.

Two other traders have also recently pleaded guilty to commodities fraud and spoofing in a case unrelated to Edmonds, but part of the crackdown on the practice.

In the separate case, related to an unidentified New York financial services firm, two former traders pleaded guilty in Texas for their role in a $60-million commodities fraud and spoofing conspiracy, Bloomberg reports. Both defendants will be sentenced in mid-to-late February.

“As part of their pleas, Gandhi and Mohan admitted that from March 2012 to March 2014, they conspired with Yuchun “Bruce” Mao and others at the first firm (Trading Firm A) to mislead the markets for E-Mini S&P 500 and E-Mini NASDAQ 100 futures contracts traded on the Chicago Mercantile Exchange (CME) and E-Mini Dow futures contracts traded on the Chicago Board of Trade (CBOT),” according to the Justice Department.

By Michael Kern for Safehaven.com

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