JPMorgan Chase & Co JPM.N has agreed to pay more than $ 920 million and admitted to doing wrongdoing to settle US Federal market manipulation polls in its trading of metal futures and Treasury securities, US authorities announced on Tuesday.
The landmark multi-agency settlement throws a regulatory shadow that has hung over the bank for several years and marks a signing victory for the government’s efforts to combat illegal trading in the futures and precious metals market.
JPMorgan will pay $ 436.4 million in fines, $ 311.7 million in restitution and more than $ 172 million in restitution, the Commodity Futures Trading Commission (CFTC) said on Tuesday, the largest settlement ever imposed by the derivatives regulator.
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Between 2008 and 2016, JPMorgan embarked on a model of manipulation on precious metal futures and the US Treasury futures market, the CFTC said. Traders would place orders on a side of the market that they had never intended to execute, to create a false impression of buying or selling interest that would raise or lower prices, depending on the market. regulation.
This manipulative practice, designed to create the illusion of demand, or lack thereof, is known as “spoofing”.
Some of the trades were done on behalf of JPMorgan, while on occasion traders manipulated the market to facilitate transactions for hedge fund clients, the CFTC said. The bank failed to identify, investigate and stop the behavior, even after a new monitoring system reported problems in 2014, the agency said.
“The conduct of the people referenced in today’s resolutions is unacceptable and they are no longer part of the company,” said Daniel Pinto, co-chairman of JPMorgan and CEO of the Corporate & Investment Bank.
He added that the bank had invested “considerable resources” to strengthen its internal compliance policies, monitoring systems and training programs.
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As part of parallel settlements, the bank entered into a deferred prosecution agreement with the Department of Justice and the United States Attorney’s Office for the District of Connecticut, thereby avoiding criminal prosecution for wire fraud.
He also agreed to pay $ 35 million to settle related fees with the Securities and Exchange Commission, although the bank’s payment to the CFTC would compensate for that fine, he said.
In an unusual concession, JPMorgan also admitted wrongdoing by agreeing to SEC and Department of Justice regulations.
“This record-breaking enforcement action demonstrates the CFTC’s commitment to be tough on those who intentionally break our rules, no matter who they are. Attempts to manipulate our markets will not be tolerated, ”said CFTC Chairman Heath Tarbert.
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The CFTC and the Department of Justice have sought to spoof in recent years, using sophisticated data analysis tools to spot potential wrongdoing it previously couldn’t detect.
Reuters reported that around 2017, the agency began using techniques it initially developed to spot healthcare fraud schemes to identify suspicious business patterns, including analyzing activity on healthcare providers. scholarships.
“The idea was: let’s tap into this data source to see who the worst actors are,” Robert Zink, a senior justice official who helped lead the effort, told Reuters in May.
The agency has already indicted six JPMorgan traders for manipulating metal futures between 2008 and 2016. Meanwhile, on Friday, two former Deutsche Bank AG DBKGn.DE traders were found guilty here by a federal jury of spoofing, the agency said.
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Report by Abhishek Manikandan in Bengaluru; Additional reporting by Jonathan Stempel, editing by Patrick Graham, Arun Koyyur, Nick Zieminski