JPMorgan Spoofed Gold to Keep Hedge Funds Happy, Ex-Trader Says

7.20.22 - JPMorgan Spoofed Gold to Keep Hedge Funds Happy

Gold last traded at $1,700 an ounce. Silver at $18.70 an ounce.

News Summary: Precious metal prices eased back Wednesday amid a firmer U.S. dollar. Stocks wavered as traders assessed more corporate earnings.

- Yahoo! Finance/Bloomberg

"Big hedge funds like Moore Capital Management and Tudor Capital Corp. were so important to JPMorgan Chase & Co. that its precious-metals traders routinely manipulated gold and silver markets to get the best prices on client orders, a former trader for the bank told a Chicago jury.

'They brought in a huge volume of trading, which made the bank a lot of money and our team a lot of money,' John Edmonds, a former trader on JPMorgan's precious metals desk, said Wednesday when asked about Tudor. He made similar statements about Moore Capital. 'Knowing that they're trading in the market and what they're doing' was valuable information for the bank, he said.

Edmonds worked on the JPMorgan precious-metals desk for more than a decade and pleaded guilty in 2018 to conspiracy and commodities fraud related to 'spoof' trading. He is testifying against his former boss, Michael Nowak, the longtime head of the trading desk, gold trader Gregg Smith and hedge funds salesman Jeffrey Ruffo. They're accused of thousands 'spoof' trades in which huge orders were placed and quickly canceled in the hope of moving prices up or down so they could complete desired trades.

Prosecutors allege the traders were influenced by the needs of hedge fund clients, whom at times were looking to buy or sell millions of dollars in gold or silver in a matter of seconds or minutes. Edmonds said that when a client needed an order filled, everyone on the desk would stop trading so as not to 'get in the way' of filing that order. Edmonds said he'd regularly watch Nowak or Smith use spoof trades to fill those order."