By Thaler
A convicted former JPMorgan Chase executive was sentenced to nearly two years in prison on Tuesday – the stiffest prison term given to an individual since the government’s crackdown on market manipulation.
Gregg Smith, who worked on the bank’s precious-metals desk, was convicted last year on 11 charges for manipulating gold and silver prices from 2008 to 2016.
His boss, Michael Nowak, was also convicted but was sentenced to one year and one day on Tuesday, according to Bloomberg.
Smith, 57, was described by an assistant US attorney as “the most prolific ‘spoofer’ that the government has prosecuted to date” for orchestrating an illegal scheme where he placed bogus market orders with no intention of carrying out the transactions, Bloomberg reported.
Spoofing causes market prices to go up or down, at which point the trader cancels the sale and places an opposite bet in an effort to manipulate share price – a blatant violation of the Securities and Exchange Commission’s rules.
Nowak, meanwhile, was described as “the boss” behind the scheme.
Smith will begin his sentence on Jan. 15, Chicago US District Judge Edmond Chang said in court on Tuesday, Bloomberg reported.
“You told many lies to the market,” Chang told the fraudster. “For many years, you injected fraud into the market.”
Smith’s lawyer told Bloomberg that he plans to appeal the conviction.
Prosecutors had originally wanted Smith to spend six years behind bars, according to Bloomberg, though it was revised to 23 months for an undisclosed reason.
Smith’s legal counsel reportedly argued that their client should be spared prison entirely, claiming he never personally benefitted from his illicit actions.
Nowak was originally facing five years in prison before having his sentence reduced to 12 months and one day.
JPMorgan declined to comment.
Smith’s sentencing comes after three other former JPMorgan precious metals traders, John Edmonds, Christian Trunz and Jeffrey Ruffo, were also accused of masterminding an eight-year scheme to manipulate international markets for gold and silver.
Edmonds – the first on the desk to plead guilty to market manipulation back in 2018 – said that he’d work to take down his three other former colleagues, who were charged with wrongdoing in 2019.
Edmonds testified that he learned how to “spoof” trades from colleagues at JPMorgan, where he executed as many as 400 of the fraudulent transactions, which he added was “expected” of everyone on the desk.
“Our job was to do whatever it takes to make money,” he said during Smith’s trial last year.
Prosecutors alleged the precious metals desk made as many as 50,000 spoof trades under Nowak’s watch.
Trunz – Smith’s protégé who sat next to him in JPMorgan’s New York office – also pleaded guilty to the crime and skirted jail time by agreeing to cooperate with the DOJ.
Trunz was another star witness who testified during Smith’s trial last July, where he said that Smith was so fast at placing and canceling bogus orders that his colleagues would joke he needed to put ice on his fingers to cool them down, according to Bloomberg.
“This was an open strategy on the desk. It wasn’t hidden,” he said on the stand.
Ruffo, meanwhile, who was only charged with racketeering and conspiracy, was acquitted of both last August.
In 2020, JPMorgan paid $1 billion in fines for the fraud.
