JPMorgan Chase & Co. (JPM) - Get Report is reportedly set to pay nearly $1 billion to resolve market manipulation investigations by U.S. authorities into its trading of metals futures and Treasury securities
The potential record for a settlement involving alleged spoofing could be unveiled as soon as this week, three people with knowledge of the matter told Bloomberg.
JPMorgan did not immediately respond to a request for comment.
At last check shares of the New York banking giant were down 1.5% to $92.87.
The accord would end investigations by the Justice Department, the Commodity Futures Trading Commission and the Securities and Exchange Commission into whether traders on JPMorgan’s precious metals and treasurys desks rigged markets.
A penalty approaching $1 billion would far exceed previous spoofing-related fines. It would also be on par with sanctions in many prior manipulation cases, including some brought several years ago against banks for allegedly rigging benchmark interest rates and foreign exchange markets.
Spoofing typically involves flooding derivatives markets with orders that traders don’t intend to execute. The goal is to trick others into moving prices in a desired direction.
The practice has become a focus for prosecutors and regulators in recent years after lawmakers specifically prohibited it in 2010, Bloomberg said.
While submitting and then canceling orders isn’t illegal, it is unlawful as part of a strategy intended to dupe other traders.
In 2015, JPMorgan was among firms accused of manipulating currencies. It pleaded guilty to an antitrust charge and paid a $550 million fine to the Justice Department. The bank also paid penalties to U.S. regulators.
The pending spoofing case against JPMorgan follows criminal charges filed last year against several of its employees, including a former head of the precious-metals desk, Michael Nowak.
In that case, the Justice Department used racketeering laws more commonly used in mafia and drug gang prosecutions, alleging the precious-metals desk effectively became a criminal enterprise for eight years.
Nowak and three others accused in the case pleaded not guilty and are seeking to have the charges dismissed. Two other former traders have pleaded guilty to conspiracy claims and are cooperating.
Shortly after Nowak was charged, JPMorgan learned it was the focus of a separate but related criminal investigation into the bank’s trading of Treasury securities and futures, Bloomberg said.
JPMorgan, which disclosed that investigation earlier this year, said it’s cooperating with authorities.