JP Morgan Manipulated Gold to Keep Hedge Funds Happy

JP Morgan manipulated gold
Market News: JP Morgan manipulated gold and silver market

An ex-trader says JP Morgan spoofed gold to keep hedge funds happy.

He says client orders made a lot of money for the bank.

Big hedge funds like Moore Capital Management and Tudor Capital Corp. were so important to JPMorgan Chase & Co. that its precious-metals traders routinely manipulated gold and silver markets to get the best prices on client orders, the former trader for the bank told a Chicago jury. 

“They brought in a huge volume of trading, which made the bank a lot of money and our team a lot of money,” John Edmonds, a former trader on JPMorgan’s precious metals desk, said on Wednesday when asked about the incidents.

This isn’t the first time a bank colludes with hedge funds to cheat non-institutional investors from their money.

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JP Morgan manipulates gold and silver market

Gold and Siver Market
Gold and Silver Market

Edmonds worked on the JP Morgan precious-metals desk for more than a decade and pleaded guilty in 2018 to conspiracy and commodities fraud related to “spoof” trading. – Bloomberg

Spoofing is a term used when traders place market orders and cancels them before the order is fulfilled, initiating fake orders into the market without the intent of paying them.

Earlier this year the DOJ targeted hedge fund Muddy Waters for flooding the market with fake orders.

John Edmunds is currently testifying against his former boss, Michael Nowak, the longtime head of the trading desk, gold trader Gregg Smith and hedge funds salesman Jeffrey Ruffo.

They’re accused of thousands “spoof” trades in which huge orders were placed and quickly canceled in the hope of moving prices up or down so they could complete desired trades.

Prosecutors allege the traders were influenced by the needs of hedge fund clients, whom at times were looking to buy or sell millions of dollars in gold or silver in a matter of seconds or minutes.

Edmonds said that when a client needed an order filled, everyone on the desk would stop trading so as not to “get in the way” of filing that order.

Edmonds said he’d regularly watch Nowak or Smith use spoof trades to fill those order, per Bloomberg.

Bank gets caught red-handed

JP Morgan Precious Metals Desk
JP Morgan Precious Metals Desk

Jurors were shown instant messages between Ruffo and traders at Moore Capital and Tudor, as well as Smith’s trading records around those communications as evidence of improper trading in gold and silver futures.

Edmonds, who sat near Ruffo and Smith, said the hedge fund clients were “price sensitive” and concerned about even small differences in prices of gold and silver given the massive size of their orders.

One example from prosecutors was an order on Dec. 12, 2011, by Moore Capital, which sought to sell 1 million ounces of silver at $31 an ounce.

Smith placed orders to buy 1,190 futures contracts, each for 5,000 ounces of silver, data presented to the jury showed.

Edmonds said that was consistent with a spoof trade designed to drive the price higher, where Smith wanted to sell.

Minutes later, Smith sold 200 contracts, which is the equivalent to 1 million ounces, and canceled his buy orders.

The jury also heard about a Jan. 18, 2012, gold trade on behalf of Tudor where Ruffo was asked to unload more than 900 contracts.

As the price of gold decreased around 8 a.m., Tudor’s James Phelan wrote to Ruffo, “tell Gregg to wake up,” according to a chat log.

Shortly thereafter, Smith started entering orders on the buy side. “He was trying to move the market higher so he can sell at a higher price for an important client,” Edmonds said.

Sources – Bloomberg.

Will JP Morgan face any consequences?

JP Morgan manipulated gold and silver market to keep hedge funds happy
JP Morgan manipulated gold and silver market to keep hedge funds happy

The case is US v. Smith et al, 19-cr-00669, US District Court, Northern District of Illinois (Chicago).

For the reasons explained in this Opinion, the Defendants’ motion to dismiss, R. 114, is denied except for the bank fraud counts (Counts 5–7).

Those counts are dismissed.

The remainder of the Superseding Indictment survives.

You can view the entire case text, opinion, and details here.

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Related: Chicago Tribune Says Citadel Securities' Dark Pool Targets Small Investors

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  1. Hilary E Hager

    Share share, share!!!

  2. Daryl T Olson

    It seems like “The Godfather” movie comment about they were going legit in 10-15 years was accurate. Organized crime now seems to control the stock market (and many other areas) as banks, hedge funds, Federal Reserve (created/owns DTCC to hide NYSE trades from public/lawsuits, and exempt from income taxes..), and SEC all seem to be in bed together – working against the public interest.

  3. Ben Jordan

    Everyone is making a big mistake in assuming that the Fed is printing too much money and going to make the dollar worthless.

    Why is it with trillions and trillions of new dollars in circulation the price of gold and silver are dropping?

    The answer, which nobody on the Internet seems to understand or want to talk about is very simple.

    All The excess dollars in circulation are simply IOUs from the US treasury to the federal reserve bank.

    It would be like if you had a favorite child and every time they needed money they came to you and wrote you a personal check and you gave them cash in exchange for their personal check which you then simply never deposited and just kept it in your desk drawer.

    This persons bank account would never be overdrafted because they knew that you would never cash all the checks that you’ve written to them.

    In return you would have complete control over the person writing all these worthless checks, because anytime you wanted you could submit them deposit them and this person would be charged with fraud.

    So at the end of the day the dollar will get stronger, and gold and silver will get weaker, until the US treasury and the federal reserve bank decide to reverse their present course.

    • Ben Jordan

      I meant to say all the checks that they have written to you.

  4. Carolyn

    Bank of America fined for fraud, too, today.

  5. Frank Nez

    Let’s start a discussion! Leave your thoughts below.

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