Opening Remarks by Assistant Attorney General Brian A. Benczkowski on Press Call Announcing United States v. Gregg Smith, et al.

Good morning everyone.  I’m Brian Benczkowski, the Assistant Attorney General for the Criminal Division at the Department of Justice.  With me is Jamie McDonald, Director of Enforcement at the CFTC.   

We are here to announce the government’s most significant step to date in our ongoing efforts to identify and prosecute fraud and manipulation in our Nation’s commodities markets.  

Today’s announcement involves the alleged manipulation of gold, silver, platinum, and palladium futures prices, by executives and traders, at one of this country’s premier financial institutions.  These precious metals are widely used for investment and industrial purposes, and they are key benchmarks for the U.S. economy.  And the investing public relies, as they should, on the integrity of those markets. 

In an indictment unsealed today, and filed in the Northern District of Illinois, we have charged three individuals -- two current directors and one former director at JPMorgan -- with a racketeering conspiracy and other federal crimes in connection with their alleged manipulation of the markets for precious metals futures contracts.  The defendants are Gregg Smith, Michael Nowak, and Christopher Jordan.  

I would like to remind everyone that the allegations are just that – allegations – and that the defendants are innocent until proven guilty. 

As alleged, Nowak was a managing director and ran JPMorgan’s global precious metals desk, which had centers in New York, London, and Singapore.  Smith and Jordan were executive directors and traders on the precious metals desk in JPMorgan’s New York office. 

Two other former precious metals traders at JPMorgan, John Edmonds and Christian Trunz, have pleaded guilty in the past year in connection with this investigation.  A third precious metals trader, Corey Flaum, who worked with Gregg Smith at Bear Stearns before it was acquired by JPMorgan, pleaded guilty in July.

Between May 2008 and August 2016, the defendants and their co-conspirators allegedly engaged in widespread spoofing, fraud, and market manipulation while working on JPMorgan’s precious metals desk.  In thousands of trades, they placed orders they did not intend to execute in an effort to create liquidity and drive prices toward orders they wanted to execute on the opposite side of the market. 

They also allegedly defrauded clients who had bought or sold “barrier options”; they did this by trading precious metals futures contracts in a way that sought to push the price towards a level at which the bank would make money, or away from a level at which the bank would lose money.  The indictment thus alleges that the defendants and their co-conspirators harmed other market participants, as well as JPMorgan’s own clients.

The scheme alleged in today’s indictment involved high-level supervisors and multiple co-conspirators.  And it spanned 8 years and thousands of trades.

This conduct was identified and investigated through a combination of data analysis and traditional law enforcement techniques.  Going forward, the Department and its law enforcement partners will be expanding our use of data analysis to other products and financial markets, as we hone in on the unmistakable footprints of fraudulent and manipulative trading.

It bears mention that, while the data allows law enforcement to identify trading patterns, companies are best-positioned to review and surveil the trading activity of their own employees.  We expect them to do so diligently. 

We encourage banks, proprietary trading firms, and other companies trading in our markets to identify this conduct and voluntarily self-disclose it to the Department, the FBI, the CFTC, and other regulators, rather than wait for us to find it on our own.

Finally, I want to thank the hardworking prosecutors in the Criminal Division who are handling this case.  In particular, Trial Attorneys Avi Perry and Matthew Sullivan have done outstanding work. 

I thank the dedicated law enforcement agents at the FBI who have investigated – and will continue to investigate – this case. 

And finally, I am grateful for all of the cooperative work we are doing with our partners at the CFTC, so thank you Jamie and your staff for all of your efforts.  I appreciate you being here today, and I’ll turn it over to you for some additional remarks.