A US federal court has dismissed a class-action lawsuit that accuses JPMorgan Chase & Company (NYSE:JPM), its subsidiaries and 20 unnamed “John Doe” defendants of silver manipulation. Judge Robert P. Patterson Jr. found that the complaint contains many “conclusory allegations,” but fails to provide the specific factual allegations needed to substantiate a claim.
The 90-page class-action lawsuit names 44 plaintiffs who claim that they “lost money and were injured in their property” because the aforementioned defendants unlawfully combined, conspired and agreed to manipulate the prices of COMEX silver futures and options contracts. The plaintiffs allege that these acts occurred on June 26, 2007 and between March 17, 2008 and October 27, 2010. Despite the lengthy period under consideration and the seemingly detailed complaint, Judge Patterson found the case to be weak as it fails to link JPMorgan to a single manipulative act. When “alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake,” he wrote in his Opinion & Order. Market manipulation The Commodity Exchange Act prohibits both manipulation and attempted manipulation, but the term “manipulate” is not defined. Therefore, to apply the rule of law, “the CFTC [Commodity Futures Trading Commission] and the courts have developed a four-factor test to determine whether a defendant has manipulated prices,” Patterson noted. The accused must have the ability to manipulate the market in question and exhibit specific intent to do so. There must also be an artificial price and the accused must be the “proximate cause” of that price. As is common in efforts to expose silver manipulation, the plaintiffs' lawsuit points to JPMorgan's short positions. By August 15, 2008, the suit claims that JPMorgan “frequently held 24-32 percent of the open interest in COMEX silver futures short contracts then trading.”