Dr. Stephen Leeb, one of the world’s top money managers, says that JPMorgan’s gold derivate short positions are so numerous and large that they likely exceed the entirety of the bank’s assets on hand – “which is a very dangerous position in which to be.”
“Should the price of gold ever shoot up from its current price by, say, another $1,000 in the coming weeks or months due to an unexpected “black swan” event, banking giant JPMorgan Chase would more than likely find itself underwater due to the massive gold derivative short positions it currently holds,” says Planet Today.
“What I lose sleep over is how much exposure does a bank like JPMorgan have to the [gold] derivative market,” Leeb is quoted as saying, adding that it is an “open secret” in the gold market that JPMorgan is heavy in gold derivative short positions.
“This is not fraudulent, but it’s an open secret. In fact, it’s no longer a secret because they’ve been penalized so much for it.
They’re trying to control the price of gold.”
When a stock or commodity is short sold, the short seller is on the hook for delivering that stock or commodity at a later date.
The goal is to make a profit between the current price and a future lower price.
In this case, JPMorgan appears to be selling the precious metal short using derivatives, which is effectively keeping the price of gold artificially low, says Planet Today.
Ex-JPMorgan Gold Trader Faces 30 Years for Spoofing
An Ex-JPMorgan Gold trader was found guilty of fraud in the commodities market.
Christopher Jordan was convicted of wire fraud affecting a financial institution by a federal judge in Chicago, the latest win for U.S prosecutors in their crackdown of on illegal “spoofing” trades and market manipulation.
Between 2008 and 2010, Jordan placed thousands of spoof orders, i.e., orders that he intended to cancel before execution, to drive prices in a direction more favorable to orders he intended to execute on the opposite side of the market.
Jordan engaged in this deceptive spoofing strategy while trading gold and silver futures contracts on the Commodity Exchange (COMEX), which is a commodities exchange operated by the CME Group.
These deceptive orders were intended to inject false and misleading information about the genuine supply and demand for gold and silver futures contracts into the markets.
He is scheduled to be sentenced at a later date and faces a maximum penalty of 30 years in prison.
Four other former JPMorgan precious metals traders were previously convicted in related cases.
JPMorgan Short Positions Fraud
In August 2022, Gregg Smith and Michael Nowak were convicted after trial in the Northern District of Illinois of wire fraud affecting a financial institution, commodities fraud, attempted price manipulation, and spoofing.
In September 2020, JPMorgan admitted to committing wire fraud in connection with (1) unlawful trading in the markets for precious metals futures contracts and (2) unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.
JPMorgan entered into a three-year deferred prosecution agreement pursuant to which it paid more than $920 million in criminal monetary penalties, criminal disgorgement, and victim compensation, with parallel resolutions by the Commodity Futures Trading Commission and the Securities Exchange Commission announced on the same day.
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