Two former precious metals traders at JPMorgan Chase were sentenced after being convicted a year ago for fraud, attempted price manipulation, and spoofing.
Gregg Smith, a former executive director and trader on JPMorgan’s precious metals desk in New York, was sentenced to two years and must pay a $50,000 fine, and Michael Nowak, a former managing director at JPMorgan’s global precious metals desk, was sentenced to one year and one day and to pay a $35,000 fine, the Department of Justice (DOJ) announced in a press release Tuesday.
Smith and Nowak were found guilty in August 2022 for their involvement in tens of thousands of unlawful trading sequences resulting in more than $10 million in losses to market participants.
The scheme spanned more than eight years, involved three other traders awaiting sentencing, and led to a $920 million settlement against JPMorgan by the Commodity Futures Trading Commission, which worked in conjunction with the Securities and Exchange Commission and DOJ. JPMorgan also agreed to a three-year deferred prosecution agreement as part of the deal.
“This case reaffirms the department’s steadfast commitment to hold accountable those who engage in fraud and manipulation that undermines the investing public’s trust in the integrity of our commodities markets,” said Nicole Argentieri, acting assistant attorney general of the DOJ’s Criminal Division, in the release.
As part of their market manipulation scheme, Smith and Nowak placed orders for precious metals futures contracts that they intended to cancel before execution to drive prices on orders they intended to execute on the opposite side of the market, the DOJ said.
These deceptive orders were intended to inject false and misleading information about the genuine supply and demand for precious metals futures contracts, thus spoofing the market.
JPMorgan declined to comment.