A former precious-metals trader said to have worked at JPMorgan Chase & Co. admitted he engaged in a six-year spoofing scheme that defrauded investors in futures contracts with the help of his colleagues and bosses.
John Edmonds placed hundreds of orders he never intended to execute, prosecutors said. The orders were designed to move the market, but were canceled before being matched, the Justice Department said Nov. 6. Edmonds and other traders sought to manipulate futures markets for gold, silver, platinum and palladium on the Nymex and Comex exchanges for their own benefit.
The charges are part of a broad U.S. crackdown on spoofing. Spoofing creates fake demand that pushes prices up or down. Long considered disreputable but rarely dangerous, spoofing has emerged in an era of computerized trading as a threat to market legitimacy.
In a separate case, two former traders at an unidentified New York financial services firm pleaded guilty in Texas to taking part in a $60 million commodities fraud and a spoofing conspiracy. Krishna Mohan of New York is scheduled to be sentenced on Feb. 28. Kamaldeep Gandhi of Chicago, has a sentencing date set for Feb. 22.
Both admitted to placing thousands of orders that they didn’t intend to execute, according to a statement from the Justice Department and the FBI in Chicago.
Edmonds, who lives in Brooklyn, New York, said he learned the spoofing strategy from more senior traders at the bank and said his immediate supervisors approved of it, according to the Justice Department.
“By conspiring with his trading partners to place spoof orders, he blatantly attempted to profit off of an unfair market that he helped create,” FBI Assistant Director in Charge William Sweeney said in a statement.
Prosecutors didn’t identify Edmonds’s employer, but a person familiar with the case said he worked at the time for New York-based JPMorgan. A JPMorgan spokesman declined to comment. Edmonds’s lawyer, Joseph DiBenedetto, didn’t return a phone call seeking comment.
Edmonds ran the scam from 2009 to 2015, covering part of the time when JPMorgan was a target of investor complaints and a subsequent regulatory investigation about price manipulation in the silver market. The investigation by the Commodity Futures Trading Commission began in 2008 in response to allegations that prices were being suppressed by large banks that were betting against the market.
Authorities specifically cited an Oct. 12, 2012, sale of silver futures contracts by Edmonds, when the CFTC investigation was under way. The CFTC case was closed without action in 2013. A CFTC spokesperson didn’t respond to a request for comment.
Edmunds’s plea was unsealed Nov. 5 by a federal judge in Hartford, Conn., where on Oct. 9 Edmonds pleaded guilty to conspiracy and commodities fraud. He is scheduled to be sentenced Dec. 19.
Thomas Carson, a spokesman for the U.S. attorney in Connecticut, said the investigation is continuing.
The case is United States v. Edmonds, D. Conn., No. 18-cr-00239, order 11/5/18.
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