After Being Criminally Charged for Rigging Precious Metals, JPMorgan Chase Controls 53 Percent of All Precious Metals Contracts Held by Banks

17 Dec 2024

      https://wallstreetonparade.com/2023/04/after-being-criminally-charged-for-ri...

By Pam Martens and Russ Martens: April 3, 2023 ~

Jamie Dimon Sits in Front of Trading Monitor in his Office (Source -- 60
Minutes Interview, November 10, 2019)
Jamie Dimon Sits in Front of Trading Monitor in his Office (Source: 60
Minutes Interview, November 10, 2019)

According to the Federal Deposit Insurance Corporation (FDIC), there were
4,706 federally-insured banks and savings associations in the U.S. as of
December 31, 2022. Of those, according to the quarterly report released
last Friday from the Office of the Comptroller of the Currency (OCC), a
little less than one-quarter found a reason to engage in derivative trading
activities.

As of December 31, 2022, just 1,139 FDIC-insured commercial banks and
savings associations reported trading of derivatives in the fourth quarter
of 2022, according to the OCC. Ostensibly, instead of running a derivatives
casino, the other three-quarters of taxpayer-subsidized banks were doing
what taxpayers want federally-insured banks to do: make business loans;
provide affordable mortgage loans to homebuyers; provide checking accounts
devoid of hacking, identity theft and predatory overdraft fees; and not
blow up the bank by getting in bed with derivatives, crypto or dodgy Wall
Street IPOs.

As it does each quarter, the OCC report rang this alarm bell:

“A small group of large financial institutions continues to dominate
trading and derivatives activity in the U.S. commercial banking system.
During the fourth quarter of 2022, four large commercial banks represented
88.2 percent of the total banking industry notional amounts [of
derivatives] and 62.5 percent of industry net current credit exposure
(NCCE).”

Those four banks are Goldman Sachs Bank USA with $52.6 trillion in notional
(face amount) derivatives exposure; JPMorgan Chase Bank N.A. with $49.5
trillion in notional derivatives exposure; Citigroup’s Citibank with $47
trillion in notional derivatives exposure; and Bank of America with $19.4
trillion in notional derivatives exposure.

One area that particularly stands out in the current OCC report is data
showing JPMorgan Chase Bank N.A. held $200.12 billion in precious metals
derivative contracts at its federally-insured bank as of December 31, 2022,
versus a total of $378.12 billion for all banks in the U.S. holding
derivatives. That’s one bank holding 53 percent of all precious metals
contracts in the U.S. banking system. (See Table 21 on page 26 of the OCC
report.)

And there’s no guarantee that the OCC report captures the full picture of
this highly concentrated derivatives market. (See our report: Wall Street
Banks Are Dangerously Evading U.S. Derivatives Rules by Making Trades at
Foreign Subsidiaries.)

It is hard to understate the regulatory failure of allowing JPMorgan Chase
to continue to have this outsized presence in the precious metals
derivatives market.

On September 29, 2020, the U.S. Department of Justice charged JPMorgan
Chase with rigging the precious metals market and hit it with a criminal
felony count for its conduct, to which it admitted. According to the
Justice Department, the rigging occurred for more than eight years, from
March of 2008 to August of 2016, and involved “tens of thousands” of
incidents. The Justice Department wrote that traders at JPMorgan Chase:

“…knowingly and intentionally placed orders to buy and sell precious metals
futures contracts with the intent to cancel those orders before execution
(‘Deceptive PM [Precious Metals] Orders’), including in an attempt to
profit by deceiving other market participants through false and fraudulent
pretenses and representations concerning the existence of genuine supply
and demand for precious metals futures contracts. By placing Deceptive PM
Orders, the Subject PM Traders intended to inject false and misleading
information about the genuine supply and demand for precious metals futures
contracts into the markets, and to deceive other participants in those
markets into believing something untrue, namely that the visible order book
accurately reflected market-based forces of supply and demand. This false
and misleading information was intended to, and at times did, trick other
market participants, including competitor financial institutions and
proprietary traders, into reacting to the apparent change and imbalance in
supply and demand by buying and selling precious metals futures contracts
at quantities, prices, and times that they otherwise likely would not have
traded.”

The trading conduct in precious metals was so bad at JPMorgan Chase that
the Justice Department took the unprecedented step of charging some of the
precious metals traders involved under the Racketeer Influenced and Corrupt
Organizations Act (RICO), a statute typically reserved for organized crime
figures.

Last week, the Senate Banking Committee and the House Financial Services
Committee held separate hearings on the bank runs and abrupt collapses of
Silicon Valley Bank and Signature Bank in March, the second and third
largest bank failures in U.S. history. (The largest bank failure was
Washington Mutual in 2008.) Those banks, respectively, held $175 billion
and $88.6 billion in deposits as of December 31, 2022. As of the same date,
JPMorgan Chase Bank N.A. held $2.015 trillion in deposits in domestic
offices, of which $1.058 trillion were uninsured.

Uninsured deposits are at risk of flight if customers lose confidence in
the management of a bank. The fastest way for depositors to lose confidence
in a bank is a steady stream of scandals and criminal conduct while the
Board of Directors of the bank fails to replace the Chairman and CEO who
was at the helm of the bank throughout the endless series of scandals and
criminal conduct.

The Board of Directors of JPMorgan Chase Bank have allowed Jamie Dimon to
remain as Chairman and CEO despite five felony counts (to which the bank
admitted) and a rap sheet that is unprecedented in the annals of banking in
the U.S.

The Board kept Dimon in place when the bank was charged by the Justice
Department with two criminal felony counts for its role in aiding and
abetting the largest Ponzi scheme in history – Bernie Madoff’s looting of
customer accounts.

The Board kept Dimon at the helm when the U.S. Senate’s Permanent
Subcommittee on Investigations issued a 300-page report on the bank’s
“London Whale” derivative trades, using bank depositors’ money to engage in
reckless gambling and losing at least $6.2 billion.

The bank received another felony count for its role in rigging the foreign
exchange market and one felony count each for rigging the precious metals
market and U.S. Treasury market.

Now, a Federal Court has ruled that Dimon must sit for a deposition in a
federal lawsuit brought by the U.S. Virgin Islands, charging JPMorgan Chase
with, effectively, being the cash conduit for Jeffrey Epstein’s sex
trafficking ring that victimized underage girls. (See our March 6 report
here.)

It’s long past the time for federal regulators to do their job and replace
management and the Board at JPMorgan Chase and break up this dangerous
trading behemoth that is masquerading as a federally-insured bank.

After Being Criminally Charged for Rigging Precious Metals, JPMorgan Chase Controls 53 Percent of All Precious Metals Contracts Held by Banks

Gunnar Larson