Class Action Targets JPMorgan Over Alleged Illegal 'Spoofing' in Futures Markets
The technique, which Congress criminalized as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, involves placing orders to buy and sell Treasury futures to give the appearance of high market demand and artificial prices, without ever intending to execute the orders.
July 30, 2020 at 03:42 PM
3 minute read
JPMorgan Chase & Co. office/photo courtesy of shutterstock
A class action lawsuit filed Thursday in Manhattan federal court accused JPMorgan Chase & Co. of manipulating futures markets through an outlawed trading practice to create artificial supply and demand.
The lawsuit alleged that JPMorgan, its employees and related entities for years had used a illegal strategy known as "spoofing" to drive up trading on futures contracts in order to reap "excessive profit."
The technique, which Congress criminalized as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, involves placing orders to buy and sell Treasury futures to give the appearance of high market demand and artificial prices, without ever intending to execute the orders.
According to the complaint, JPMorgan confirmed in a Feb. 25 10-K filing that it was under criminal and regulatory investigation regarding illegal market manipulation, including a probe by the Department of Justice's Criminal Division related to trading practices in the metals markets.
Beginning in 2018, the Justice Department criminally charged the head of JPMorgan's precious metals trading desk and other employees for their role in manipulating the prices of precious metals futures contracts. Two employees, John Edmonds and Christian Trunz, have since pleaded guilty and are cooperating with the ongoing federal criminal investigation, the complaint said.
In Thursday's lawsuit, Thomas Gramatis, an Illinois-based trader, said that most details of JPMorgan's trading practices in futures markets remain hidden from public view in order to protect the firm's proprietary strategies.
"Defendants also were aware that their conduct was illegal and if exposed would subject them to serious criminal and civil penalties. Accordingly, Defendants' misconduct was concealed. Discovery is likely to yield additional facts to support Plaintiff's allegations," his attorneys from Freed Kanner London & Millen in Illinois wrote in the 26-page filing.
A spokesman for JPMorgan declined to comment Thursday on the lawsuit and the pending investigations.
The suit, which alleged violations of the Commodity Exchange Act, seeks class damages on behalf of traders who dealt in Treasury futures or options on U.S. exchanges since 2009, as well as punitive and exemplary damages and interest.
Gramatis is represented by Steven A. Kanner, Douglas A. Millen and Brian M. Hogan of Freed Kanner in Bannockburn, Illinois.
The case, captioned Gramatis v. JPMorgan, has been assigned to U.S. District Judge Louis L. Stanton of the Southern District of New York.
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