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(Kitco News) – After a three-week trial, a jury continues to deliberate on the most significant trial to impact the precious metals market in history.
Michael Nowak, head of JPMorgan Chase’s precious metals division, along with gold trader Gregg Smith and Jeffrey Ruffo, a director specializing in sales of hedge funds, are accused of rigging and manipulating gold and silver prices for eight years between 2008 and 2016.
Nowak and Smith are charged with extortion conspiracy and conspiracy to commit price manipulation, wire fraud, merchandise fraud and spoofing; Ruffo was charged with racketeering and conspiracy. All three men face years in prison if found guilty.
“Executives at one of the largest banks in the world have conspired for years to manipulate the markets in precious metals,” said Matthew Sullivan, an attorney with the US Department of Justice, during his closing arguments on Thursday. “All three worked together towards the same goal: to generate profits for the precious metals desk through spoofing.”
However, the defense team argued in its closing statement Friday that Nowak’s spoofing orders were legitimate and executed about 25% of the time, “making him the worst spoofer in the world.”
David Meister, Nowak’s defense attorney, said in his closing arguments that government prosecutors had relied on lousy evidence and dubious witnesses to support their theory that Nowak was a master crook.
“Mike is not some criminal mastermind of the government narrative,” Meister said.
Spoofing is a type of manipulative trading where bids and offers are placed in the market and canceled before they can be executed. There is never any intention to carry out these orders. The trades are made to give a false sense of size on one side or the other of the market.
As the jury is now deciding, the three-week trial has provided exceptional insight into the world’s largest gold bullion bank.
JPMorgan does not break down its earnings in its earnings records; However, documents presented to the court during the trial showed how profitable the precious metals and commodities markets are for the investment bank.
According to Bloomberg, which reported on the trial, JPMorgan made between $109 million and $234 million in annual profits related to trading precious metals markets between 2008 and 2018. The bank also made an average of $30 million a year trading and transporting physical bullion.
The precious metals market continues to be a profitable trading venue for the bank. In 2020, JPMorgan reported record revenue of $1 billion trading gold and silver. The precious metals market saw unprecedented demand as the global economy ground to a halt during the COVID-19 pandemic.
The trial also revealed that JPMorgan is a major player among a handful of precious metals banks in the precious metals market. It stores billions of dollars worth of gold and silver in key markets such as London, New York and Singapore. The Bank
According to the process, 40% of all gold transactions in 2010 were handled by JPMorgan.
The trial also showed how much the three traders made from trading gold and silver. According to data presented to the court, Nowak, who headed the commercial department, earned $23.7 million between 2008 and 2016. Smith earned $9.9 million over the eight years. And Ruffo earned $10.5 million.
According to Bloomberg, some judges “gasped” when they heard how much the three were making.
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