JPMorgan to Pay $920 Million in Spoofing Case

The Commodity Futures Trading Commission imposed its largest penalty ever, $920 million on JP Morgan Chase to resolve a spoofing case.
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JPMorgan Chase  (JPM) - Get Report has admitted wrongdoing and agreed to pay more than $920 million to resolve market-manipulation investigations by U.S. authorities into its trading of metals futures and Treasury securities. 

At last check shares of the New York banking giant were down less than 1% to $95.56.

The Commodity Futures Trading Commission said in a statement that this was the biggest monetary penalty it has ever imposed. It includes a $436.4 million fine, $311.7 million in restitution and more than $172 million in disgorgement.

The CFTC said its order will recognize and offset restitution and disgorgement payments made to the Department of Justice and Securities and Exchange Commission.

The practice under investigation, known as 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.

Bloomberg first reported the settlement last week.

The agreement ends a criminal investigation that has led to a half-dozen employees being charged for allegedly rigging the price of gold and silver futures for more than eight years. Two have entered guilty pleas and four others are awaiting trial.

“The conduct of the individuals referenced in today’s resolutions is unacceptable and they are no longer with the firm,” Daniel Pinto, co-president JPMorgan Chase and CEO of the corporate and investment bank, said in a statement. “We appreciate that the considerable resources we’ve dedicated to internal controls was recognized by the DOJ, including enhancements to compliance policies, surveillance systems and training programs.”

The commission said that the bank entered to a deferred-prosecution agreement with the Justice Department as part of the settlement.

Spoofing has become a focus for prosecutors and regulators in recent years after lawmakers specifically prohibited it in 2010.

While submitting and then canceling orders isn’t illegal, it is unlawful as part of a strategy intended to dupe other traders. 

The Justice Department accused JPMorgan metals traders under the 1970 Racketeer Influenced and Corrupt Organizations, or RICO, Act, which is typically applied to organized crime cases.