JP Morgan Blames Bear Stearns For ‘Criminal Enterprise’ At Precious Metals Trading Desk
JP Morgan Blames Bear Stearns For ‘Criminal Enterprise’ At Precious Metals Trading Desk from ZeroHedge
Now that prosecutors have blamed what they have described as a criminal organization operating inside JP Morgan, it appears the largest bank in the US by assets is resorting to an old strategy for sloughing off accusations of corporate fraud: Blaming it all on an acquisition.
According to Bloomberg, two traders who joined JPM’s precious metals trading desk after the takeover of Bear Stearns helped introduce the illegal manipulation strategy known as ‘spoofing’ to their peers on the desk, including the bank’s now-former head of the bank’s precious metals trading desk, Michael Nowak, who was one of three employees charged with participating in an organized fraud yesterday. Though prosecutors allege that some of the desk’s employees were already engaged in ‘deceptive practices’.
The two men who purportedly brought ‘spoofing’ to JP Morgan are Gregg Smith, one of the men arrested yesterday, and Christiaan Trunz, who joined the desk after JPM’s government-backed takeover of Bear Stearns. Trunz was famously quoted in yesterday’s indictment, including one exchange where he was telling a co-conspirator about fake orders being put out by Smith.
Prosecutors said that ultimately 12 JPM employees used the strategy during the years between 2008 and 2016 that are the primary focus of the investigation.
That pair, Gregg Smith and Christiaan Trunz, showed their new JPMorgan colleagues “a new style of layering multiple deceptive orders at different prices in rapid succession,” prosecutors said. The strategy made their market spoofing more difficult to execute and detect, prosecutors wrote in the indictment of Smith and two others. Trunz pleaded guilty last month and is cooperating with authorities.
The strategy was adopted by Michael Nowak, who was JPMorgan’s global head of precious metals trading when he was put on leave last month. Federal prosecutors charged Nowak, Smith and a third man, Christopher Jordan, of “conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity” – language that sounds more like RICO charges.