On September 29, the U.S. Commodity Futures Trading Commission (CFTC) announced an order filing and settling charges against JPMorgan Chase & Company and its subsidiaries, JPMorgan Chase Bank, N.A., and J.P. Morgan Securities LLC (collectively, JPM). The order finds that, over the course of eight years, JPM engaged in manipulative and deceptive conduct and spoofing. JPM is to pay $920.2 million – the largest amount of monetary relief ever imposed by the CFTC. Qualified individuals may now submit whistleblower award claims for the case, which could result in the largest whistleblower awards in CFTC history.
According to the order, from at least 2008 through 2016, JPM placed hundreds of thousands of spoof orders in precious metals and U.S. Treasury futures contracts. Numerous JPM traders placed these spoof orders “to buy or sell certain gold, silver, platinum, palladium, Treasury note, and Treasury bond futures contracts with the intent to cancel those orders prior to execution.” The CFTC order finds that JPM’s spoofing “significantly benefited JPM and harmed other market participants.” Additionally, the order finds that JPM did not investigate and stop the misconduct, despite numerous red flags.
The $920.2 million of monetary relief includes $311,737,008 in restitution, $172,034,790 in disgorgement, $436,431,811 in civil monetary penalties. All of these figures are the largest monetary amounts in any spoofing case.
“Spoofing is illegal—pure and simple,” stated CFTC Chairman Heath P. Tarbert. “This record-setting enforcement action demonstrates the CFTC’s commitment to being tough on those who intentionally break our rules, no matter who they are. Attempts to manipulate our markets won’t be tolerated. The CFTC will take all steps necessary to investigate and prosecute illegal activities that could ultimately undermine the integrity of the American free enterprise system.”
“This action sends the important message that if you engage in manipulative and deceptive trade practices, you will be caught, punished, and forced to give up your ill-gotten gains,” added Division of Enforcement Director James McDonald. “The CFTC is committed to working with our law enforcement and regulatory partners to eradicate this unlawful activity and to hold those responsible fully accountable.”
On September 30, the CFTC posted a Notice of Covered Action for the case. This notice signals that individuals should now submit whistleblower award claims for the case. Through the CFTC Whistleblower Program, qualified whistleblowers, or individuals who voluntarily submit original information that leads to a successful enforcement action, are entitled to monetary awards of 10-30% of the funds recouped by the government. Whistleblower awards for the JP Morgan case could range from $92 to $276 million.
In addition to whistleblower awards, the CFTC Whistleblower Program provides anti-retaliation protections to whistleblowers, as mandated by the Dodd-Frank Act. These include confidentiality provisions. Since issuing its first award in 2014, the CFTC Whistleblower Program has awarded approximately $120 million to whistleblowers, and enforcement actions associated with these awards have led to nearly $950 million in monetary relief.