Former J.P. Morgan Precious Metals Traders Sentenced to Prison

SCARSDALE, NY — Two former precious metals traders were sentenced Tuesday for engaging in fraud, attempted price manipulation and spoofing.

Acting Assistant Attorney General Nicole M. Argentieri of the United States Department of Justice said Gregg Smith, 59, of Scarsdale, and Michael Nowak, 49, Montclair, New Jersey, were part of a market manipulation scheme that spanned more than eight years, involved tens of thousands of unlawful trading sequences and resulted in more than $10 million in losses to market participants.

Smith was sentenced to two years in prison and a $50,000 fine. Nowak was sentenced to one year and one day in prison and a $35,000 fine.

Argentieri said the men used their positions as some of the most powerful traders in the worldwide precious metals to engage in an egregious effort to manipulate prices for their benefit.

“This case reaffirms the department’s steadfast commitment to hold accountable those who engage in fraud and manipulation that undermines the investing public’s trust in the integrity of our commodities markets,” she said.

According to prosecutors, between May 2008 and August 2016, Smith and Nowak, along with other traders on the JPMorgan Chase & Co. precious metals desk, engaged in a widespread spoofing, market manipulation and fraud scheme.

Smith was an executive director and trader on JPMorgan’s precious metals desk in New York. Nowak was a managing director and ran JPMorgan’s global precious metals desk.

As part of their market manipulation scheme, they placed orders for precious metals futures contracts that they intended to cancel before execution to drive prices on orders they intended to execute on the opposite side of the market.

Smith and Nowak engaged in tens of thousands of deceptive trading sequences for gold, silver, platinum and palladium futures contracts traded through the New York Mercantile Exchange Inc. and Commodity Exchange Inc.

The deceptive orders were intended to inject false and misleading information about the genuine supply and demand for precious metals futures contracts into the markets.

In September 2020, JPMorgan admitted to committing wire fraud in connection with unlawful trading in the markets for precious metals futures contracts and 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 through which it paid more than $920 million in a criminal monetary penalty, criminal disgorgement and victim compensation, with parallel resolutions by the Commodity Futures Trading Commission and the Securities Exchange Commission announced on the same day.