The settlement will fully resolve investigations carried out by the DOJ, CFTC and SEC into trades made over nearly ten years.
The US DOJ (Department of Justice) has entered into a deferred prosecution agreement with JP Morgan Chase to settle a probe into the trading practices by former employees in the precious metals and US Treasuries markets.
Under the agreement, JP Morgan will pay USD 920 million to fully resolve investigations carried out by the DOJ, the CFTC (Commodity Futures Trading Commission) and the SEC (Securities & Exchange Commission) into trades made between March 2008 and August 2016.
The payment will cover a criminal monetary penalty, criminal disgorgement, and victim compensation, which the DOJ said “reflects the nature and seriousness of the bank’s offences”.
The case involves numerous traders and sales personnel on JP Morgan’s precious metals desk in New York, London and Singapore, who engaged in a scheme to defraud. In tens of thousands of instances, they placed orders to buy and sell precious metals futures contracts with the intent to cancel those orders before execution, seeking to profit by deceiving other market participants about the existence of genuine supply and demand for those contracts.
“In addition, on certain occasions, traders on the precious metals desk engaged in trading activity that was intended to deliberately trigger or defend barrier options held by JP Morgan and thereby avoid losses,” the DOJ said. Five former JP Morgan traders and one former salesperson have been indicted in connection with the case – two of whom have pleaded guilty and await sentencing.
In a second distinct scheme, traders on JP Morgan’s US Treasuries desk in New York and London placed thousands of orders to buy and sell US Treasury products (futures, bonds, notes) with the intent to cancel those orders before execution, also trying to deceive market participants with false and misleading information concerning market supply and demand.
“The conduct of the individuals referenced in today’s resolutions is unacceptable and they are no longer with the firm,” said Daniel Pinto, co-president of JP Morgan Chase and CEO of its corporate and investment banking division.
The deferred prosecution agreement commits JP Morgan to self-reporting violations of federal anti-fraud laws and to cooperate in any ongoing and future criminal investigations involving the bank or any of its subsidiaries.
JP Morgan and its subsidiaries have also agreed to enhance their compliance programmes where necessary and appropriate, and to report to the government regarding remediation and implementation of the enhanced compliance programmes.
The deferred prosecution agreement is available here.