JPMorgan consented to pay $920.2 million in criminal penalties, restitution, and disgorgement in a three-year deferred prosecution agreement (DPA) with the United States Department of Justice (DOJ), involving unlawful spoofing & trading in the U.S. Treasury futures and precious metals futures markets dating back to 2008.
The bank and its associates have also entered into separate settlements with the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), which have imposed their payment terms that will be offset by the bank's DPA obligations.
The Assistant Attorney General for the DOJ's Criminal Division explained that JPMorgan's traders engaged in different schemes to defraud other market participants over eight years. He added that these traders were involved in thousands of transactions meant to enhance profits and avoid losses.
The Attorney General also stated that the case's resolution reflects the nature and seriousness of JPMorgan's offenses, representing a milestone in the department's ongoing efforts to guarantee public markets' integrity.
DOJ Settlement Allows Bank to Avoid Prosecution
The DOJ settlement with JPMorgan and subsidiaries JPMorgan Chase Bank NA and J.P. Morgan Securities LLC will enable the financial institution to evade prosecution on two counts of wire fraud, granted the bank stays out of trouble and adheres to the cooperation, compliance improvement, and other terms of the DPA.
As part of that agreement, the bank acknowledged that from 2008 to 2016, traders on its precious metals and U.S. Treasuries desks placed, bought, and sold orders for metals futures and Treasury products with the intention of canceling them before execution — a tactic meant to send misleading price signals and to move markets in favorable directions. This strategy, known as "spoofing," was banned by the Dodd-Frank Act and has been the subject of a multi-year clampdown by U.S. regulators.
Similar accusations appeared in the CFTC's consent order with JPMorgan. According to the agency, the bank made over $172 million from its traders' manipulative tactics on CME Group Inc. exchanges, resulting in more than $311 million in losses for other participants.
The CFTC Chairman stated that spoofing is illegal and that the authorities' enforcement actions show their commitment to sanction those who break the rules.
Meanwhile, the SEC, which settled with subsidiary J.P. Morgan Securities, claimed that more than one hundred spoofing-type episodes by the bank's Treasuries desk traders took place between April 2015 and January 2016. Also adding that the bank's manipulative trading in Treasury cash securities and futures began at least several years earlier.
The DOJ said the bank earned credit for cooperating with the government's investigation and its self-improvement efforts. Still maintained, JPMorgan had neglected to self-disclose and had already pled guilty once before over similar misconduct.
Although the settlements enable JPMorgan to close its chapter of this story, it will be costly for the bank. The $920 million amount it has agreed to pay marks the largest monetary relief ever ordered, according to the CFTC.
Additionally, the $311 million in restitution, $172 million in disgorgement, and $436 million fine imposed by the CFTC are also the biggest of any spoofing case.
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