JP Morgan and RICO! JP Morgan’s Trading Desk “Criminal Enterprise”
JP Morgan and RICO! JP Morgan’s Trading Desk “Criminal Enterprise” from ZeroHedge
Who would have thought that JPMorgan’s precious metals trading desk is the functional equivalent of the mafia, and that its one-time leader, Blythe Masters, was the mafia’s don?
Well, almost everyone who didn’t mind being designated a conspiracy theorist for years. And now comes vindication, because this has just been confirmed by the DOJ, which accused the PM trading desks at JPMorgan of being deeply involved in what prosecutors described as a “massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants.”
In an indictment unsealed on Monday morning, the DoJ charged Michael Nowak, a JPMorgan veteran and former head of its precious metals trading desk and Gregg Smith, another trader on JPM’s metals desk, in the probe. (Blythe Masters was somehow omitted).
“Based on the fact that it was conduct that was widespread on the desk, it was engaged in in thousands of episodes over an eight-year period — that it is precisely the kind of conduct that the RICO statute is meant to punish,” Assistant Attorney General Brian Benczkowski told reporters.
Here’s where it gets extra interesting: according to Bloomberg, the unusually aggressive language language embraced by prosecutors reminds legal experts of indictments utilizing the RICO Act – a law allowing prosecutors to take down ‘criminal enterprises’ like the mafia by charging all members of the organization for any crimes committed by an individual on behalf of the organization.
Prosecutors charged the head of JP Morgan’s global metals trading operation and two other traders with “conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity” – language that is typically used to describe a RICO charge.
This hints at the possibility of a deeper prosecution for JP Morgan. Already, 12 people have been charged in the precious metals market-rigging conspiracy.
“We’re going to follow the facts wherever they lead, whether it’s across desks here or at any other bank or upwards into the financial institution,” Benczkowski said.
It’s unclear what the DoJ is planning, but they’re clearly keeping their options open.
Circling back to the indictment, both Smith and Nowak were put on leave over the summer as the DoJ’s investigation neared its conclusion.
A third trader named in the indictment, Christopher Jordan, traded precious metals at JPM until he left in December 2009. He later traded precious metals at two other banks, Credit Suisse and First New York.
In a press release accompanying the indictment, Assistant Attorney General accused all three men of scheming to manipulate the precious metals market while potentially harming their bank’s clients.
“The defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants,” said Assistant Attorney General Brian A. Benczkowski. “These charges should leave no doubt that the Department is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets.”
William Sweeney, the Assistant Director in Charge of the FBI’s New York Field Office, added that this manipulation likely impacted “correlated markets and the clients of the bank they represented.”