J.P. Morgan Chase & Co. will pay $920 million to settle federal charges of manipulative trading in U.S. Treasury and precious metals markets.
The settlement represents a deferred prosecution agreement with the Department of Justice and resolution of investigations carried out by the Commodity Futures Trading Commission and the Securities and Exchange Commission involving trades made by its J.P. Morgan Securities broker-dealer subsidiary between 2008 and 2016.
The $920 million includes criminal restitution, forfeiture, disgorgement, penalties and fines.
The CFTC order brought by an enforcement division spoofing task force said J.P. Morgan traders, including the heads of both the Treasuries and metals desks, placed hundreds of thousands of spoof orders to buy or sell certain gold, silver, platinum, palladium, Treasury note, and Treasury bond futures contracts, and in many cases did cause artificial prices.
According to the SEC's order, the traders involved placed bona fide orders to buy or sell a particular Treasury security, while nearly simultaneously placing non-bona fide orders for the same security on the opposite side of the market, to provoke better prices for the firm. In the SEC settlement, J.P. Morgan Securities admitted the findings and agreed to pay disgorgement of $10 million and a civil penalty of $25 million.
Stephanie Avakian, SEC enforcement director, said in a statement that the firm "undermined the integrity of our markets with this scheme."
Daniel Pinto, co-president and chief operating officer of J.P. Morgan Chase and CEO of its corporate and investment bank, said in a statement that "the conduct of the individuals referenced in today's resolutions is unacceptable and they are no longer with the firm. We appreciate that the considerable resources we've dedicated to internal controls was recognized by the DOJ, including enhancements to compliance policies."
Market watchdog group Better Markets released a related report Tuesday on J.P. Morgan Chase's 20-year enforcement history with regulators, including 80 major legal actions resulting in more than $39 billion in fines and settlements.
Dennis M. Kelleher, Better Markets president and CEO, noted that the latest enforcement actions were the bank's third major criminal action in recent years, and the spoofing activity occurred while a prior criminal deferred prosecution agreement was in place.
"Allowing recidivist J.P. Morgan Chase to once again use shareholders' money to pay a fine and de facto buy get-out-of-jail-free cards for its executives would amount to little more than a slap on the wrist," Mr. Kelleher said in a statement. "At a time when all Americans can see how unequal and unfair justice in America really is, such a sweetheart settlement would make a mockery of the DOJ's claim to 'equal justice under law' and again confirm that the DOJ has a double standard of justice: one for the rich and powerful on Wall Street and one for everyone else on America's Main Streets."