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Spoofing Mistake Costs Wall Street Banking Giant JPMorgan $1 Billion in Penalty

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by Bhushan Akolkar · 3 min read
Spoofing Mistake Costs Wall Street Banking Giant JPMorgan $1 Billion in Penalty
Photo: Depositphotos

JPMorgan is looking ahead to settle regulatory charges of market manipulation by paying a massive $1 billion in penalty. The DOJ, the SEC, and the CFTC have been conducting an investigation for a long time over the bank involvement in unfair trading practices in the metals market.

Wall Street banking giant JPMorgan Chase & Co (NYSE: JPM) is likely to pay $1 billion in a penalty to resolve the U.S. government investigations over the allegations of involvement in manipulation of metal and treasury markets. As per the Bloomberg report, the settlement between JPMorgan and other U.S. agencies can come as early as this week.

Spoofing basically involves a targeted activity by sophistaced traders to flood the market with orders. However, there’s no intent of actual purchase by rather creating the noise to inflate prices. The practice was already banned during the 2008 financial crisis.

This also marks a major victory for the U.S. government and regulators to clamp down on some of the illegal trading practices in the commodities markets. This massive payment is likely to resolve investions by the U.S. Justice Department, the Securities and Exchange Commission (SEC), and also the U.S. Commodities and Futures Trading Commission (CFTC). So far, none of the regulator agencies have responded on this matter.

However, the sources familiar with the matter told Bloomberg that the implications for JPMorgan are far from just the penalty. The regulatory can also possibly JP Morgan’s banking practices for its wrongdoings. The U.S. Justice Department had filed charges against the baking giant’s employees trading over JP Morgan’s precious metal desk.

The DOJ accused JP Morgan of its frequent involvement in the market manipulation activities. Besides, the bank also started facing a separate investigation from the Treasury desk sometime later.

Revealed in September 2019, the case has a 14-count criminal indictment against three of the former JPMorgan employees. This also includes charges against the global head of base and precious metals trading, Michael Nowak.

JPMorgan Shares Down 1.62% after the News on Penalty

On Thursday, the shares of JPMorgan were down 1.62% ending the trading at $92.74 levels. The Wednesday correction could also be part of the broader market correction with major indices and tech stock crashing heavily. Hence, we can’t say anything about whether the news has an impact on the stock.

The JPM stock is down 33% year-to-date as the majority of the banks remain under pressure with the coronavirus-led economic slowdown. However, with the ongoing economic uncertainty, JPMorgan is confident that the Asian stock market and insurance sector will improve this year.

JPMorgan has one of those banking giants who have been actively working in the blockchain and the crypto space. In early 2019, the bank announced its native JPM Coin to make instant cross-border settlements. While the JPM Coin has yet to hit the market, previous reports suggest that the bank will limit its use to only institutional clients.

Business News, Market News, News, Stocks, Wall Street
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