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Gold Spoofing Crackdown Delivers More Convictions

Author: Jon Clarke - Bullion & Economics Editor

Published: 28 Sep 2020

Last Updated: 5 Oct 2020

Synopsis

Following the near-completion of the JP Morgan spoofing trial, 2 former Deutsche Bank AG traders have been convicted of similar charges by a Chicago jury.

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Deutsche Bank Traders Convicted

James Vorley and Cedric Chanu, former employees of Deutsche, were convicted of fraud for manipulating gold and silver prices by way of creating bogus claims that were not completed. This “bait and switch” can be used to raise or lower gold to the traders will, at which point genuine trades are carried out to take advantage of the artificial price movements. Vorley and Chanu are believed to have made numerous fake orders between 2008 and 2013 in order to influence metals prices.

The practice of spoofing was supposedly hindered by the 2010 Dodd-Frank Act, which made the placing of orders which were not intended to be fulfilled illegal. 

A Tough Month for Big Banks

The latest convictions follow last week’s sentencing of JPMorgan trader Christian Trunz, who pled guilty to charges of spoofing between 2007 and 2016. A fine of $1billion is due for JPMorgan who is hoping to avoid any further restrictions on trading. Scotiabank was fined $127million in August for what was described as a “massive price-manipulation scheme”. The charges included making false statements and incomplete disclosures regarding prior investigations into price manipulation by the Commodity Futures Trading Commission (CFTC).

Other banks have been hit with different scandals in recent weeks, such as HSBC allowing millions of pounds to be to transferred despite warnings of fraud and money laundering by American investigators. The Bank of England was also caught up in an investigation by the Financial Conduct Authority (FCA) that the bank had unwittingly allowed some traders early access to the governor’s speeches and press conferences via audio feeds which were broadcast seconds earlier than the official live feed. The FCA closed the file after a 9-month investigation stating it had not found “any activity of concern or misconduct”. 

Both Vorley and Chanu are expected to appeal their guilty verdicts.

Further Reading

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