Two ex-JPMorgan metals traders convicted of 'spoofing' gold prices

• Two former JPMorgan traders were convicted on Wednesday of manipulating metals markets.
• Michael Nowak and Gregg Smith "spoofed" gold prices by quickly placing and withdrawing buy and sell orders.

Two former JPMorgan metals traders were convicted by a Chicago jury of manipulating gold prices on Wednesday after a month-long trial into a practice seen on Wall Street known as "spoofing".

The bank's former head of global metals trading Michael Nowak and ex-trader Gregg Smith were also found guilty of wire fraud, commodities fraud, and attempted price manipulation.

Spoofing involves quickly placing and withdrawing buy and sell orders on a particular asset to create the false impression of a certain level of demand. It was outlawed in 2010 by the Dodd-Frank Act, which rebuilt financial regulations after the financial crisis.

Nowak and Smith were acquitted of racketeering charges under RICO laws, which target organized criminal groups rather than Wall Street banks. Jeffrey Ruffo, a third ex-JPMorgan employee, was cleared of all charges.

"While we are gratified that the jury acquitted Mr Nowak of racketeering and conspiracy, we are extremely disappointed by the jury's verdict on the whole, and will continue to seek to vindicate his rights in court," Nowak's lawyer David Meister said.

The convictions are the latest win for the Department of Justice in its ongoing effort to crack down on financial crime.

JPMorgan agreed in 2020 to pay a fine of $920 million after admitting its employees manipulated both Treasury bond markets and precious metals futures.

At the time, the bank admitted to manipulating precious metals futures and US government bond markets over eight years. Two other former JPMorgan traders, John Edmonds and Christian Trunz, were also previously convicted of spoofing.

"Today's jury verdict demonstrates that those who seek to manipulate our public financial markets will be held accountable and brought to justice," assistant attorney general Kenneth A. Polite, Jr. said in a statement. "These convictions underscore the Department's commitment to prosecuting those who undermine the investing public's trust in the integrity of our commodities markets."

JPMorgan did not immediately respond to a request for comment.