JPMorgan did not challenge its ability to influence market prices, and the court found that the complaint provides sufficient factual allegations to satisfy this factor of the test.
However, after that, the case appears to fall apart as the none of the remaining three elements are addressed. As mentioned, the court found that the plaintiffs made only conclusory and speculative allegations.
“Plaintiffs' claims concluding that JPMorgan, as large holder of COMEX silver futures contracts, short puts, and options, possessed the intent to hedge its holdings and manipulate market prices downward is not supported by sufficient factual allegations,” Patterson concluded.
He also noted that in its 2004 report on silver manipulation, the CFTC stated that “[t]he mere holding of speculative positions by either commercial or non-commercials is neither a violation of the CFTC or NYMEX rules, nor evidence of manipulation.”Where the complaint claims that JPMorgan traders bragged about their large trades moving silver prices, Patterson again notes weakness. This “generalized allegation does not state the date or the language of the remarks deemed to be 'bragging;' identify the traders who are alleged to have made these remarks; discuss which of the many trades that took place over the more than two-and-a-half year Class Period were the subject of the traders' bragging; or indicate that the traders were acting at the instigation of JPMorgan to move silver prices on the market.” With regards to the existence of an artificial price, the complaint points to silver's performance compared to gold's performance. “Plaintiffs raise these allegations without first explaining why COMEX silver futures prices should be compared solely to the 'benchmark of gold prices,'” declared Patterson. He said the CFTC compares prices of silver traded on the COMEX with those of silver traded in the London Bullion Market (LBMA). That is where the CFTC claims “the benchmark value of silver in the marketplace” is provided.