J. P. Morgan Chase, the nation’s largest bank, may face a class-action lawsuit alleging its manipulation of the precious metals markets for years, in light of at least six lawsuits having been filed over the past month in federal court in New York after a plea agreement involving a former J. P. Morgan precious metals trader was made public by federal prosecutors in Connecticut.
On November 6, 2018, the U.S. Attorney’s Office for the District of Connecticut announced that the former precious metals trader admitted that from approximately 2009 through 2015, he conspired with other precious metals traders at J. P. Morgan Chase to manipulate the markets for gold, silver, platinum and palladium futures contracts traded on the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX).
The trader and his fellow precious metals traders at J. P. Morgan Chase allegedly routinely placed orders for precious metals future contracts with the intent to cancel those orders before execution (the Spoof Orders). This trading strategy was admittedly 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.
The Spoof Orders allegedly were designed to artificially move the price of precious metals futures contracts in a direction that was favorable to the trader and his co-conspirators at J. P. Morgan Chase, to the detriment of other market participants. In pleading guilty, the trader admitted that he learned this deceptive trading strategy from more senior traders at J. P. Morgan Chase, and he personally deployed this strategy hundreds of times with the knowledge and consent of his immediate supervisors.
A potential class action lawsuit would include all persons who purchased or sold futures contracts or an option on NYMEX platinum or palladium or COMEX silver or gold between at least January 1, 2009 and December 31, 2015, which may include thousands of traders.
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