JPM pay a $15.7 million fine in spoofing scandal
(Kitco News) - U.S. investment banking giant JPMorgan has agreed to pay $15.7 million to settle a spoofing lawsuit, according to Reuters. The settlement announced late Wednesday night stemmed from sprawling U.S. government investigations into illegal trading in futures and precious metals markets, known as spoofing.
Spoofing is a form of market manipulation in which a trader places one or more highly-visible orders but has no intention of keeping them. So you could open an order on the futures or options market to drive the price in a particular direction but when it gets close to filling you pull the order. This then tricks other market participants into thinking there is more depth in a particular direction that is not really there.
The investment bank entered a deferred prosecution agreement and agreed to pay $920 million, including a $436 million criminal fine, to settle U.S. government probes into spoofing in Treasuries and precious metals. The bank also agreed to self-report future violations.
The U.S. Justice Department has used some sophisticated data analysis tools to spot any potential spoofing that it could not previously detect. The $15.7 million fine would recover less than one-third of the estimated classwide damages, a court filing shows. Lawyers for the traders plan to seek up to one-third of the settlement, or about $5.2 million, to cover legal fees.