DOJ clashes with former JPMorgan trader over hiring CFTC expert
Choice of experts has led to a clash between the Department of Justice (DOJ) and Michael Nowak, one of the defendants in a spoofing lawsuit at the Illinois Northern District Court.
Let’s recall that, back in 2019, the DOJ launched criminal proceedings against Nowak, former head of JPMorgan’s precious metals desk, Gregg Smith and Christopher Jordan. The indictment alleges that the defendants engaged in widespread spoofing, market manipulation and fraud while working at JPMorgan through the placement of orders they intended to cancel before execution in an effort to create liquidity and drive prices toward orders they wanted to execute on the opposite side of the market.
These criminal proceedings continue and Nowak’s attempt to hire a former CFTC advisor as an expert in this case has triggered a dispute. Nowak intends to retain Jeremy Cusimano to serve as an expert for him in this case. The Justice Department disagrees.
In particular, the DOJ notes that Cusimano worked as an Economic Advisor in the CFTC’s Division of Enforcement and, from 2010-2012, was directly involved in the CFTC’s investigation of alleged manipulative activity in the precious metals markets by JPMorgan traders (the “CFTC Silver Investigation”), including certain defendants and unindicted co-conspirators in this case.
The CFTC Silver Investigation arose from complaints regarding silver prices that focused on allegations that prices for silver futures contracts were being manipulated. In September 2008, the CFTC publicly confirmed that it was investigating these complaints about possible unlawful activity in the silver market, and the investigation continued until September 2013 when the CFTC publicly announced that it had closed the investigation without recommending charges.
In the CFTC Silver Investigation, Nowak and his co-defendant Christopher Jordan both provided sworn testimony to the CFTC investigative team, including Cusimano.
Nowak was the head of JPMorgan’s precious metals desk, which was a focus of the CFTC Silver Investigation, and now he seeks to retain Cusimano, who was a key part of the CFTC investigative team.
The DOJ is concerned that the picture drawn for the jury then would be that a former CFTC Economic Adviser investigated allegations of market manipulation by JPMorgan’s precious metals desk and concluded there was no wrongdoing. Cusimano’s presence could improperly bolster the conclusion that the CFTC, as the regulator of the commodities markets, correctly declined to bring a case, the DOJ says.
Given that Nowak has not yet retained Cusimano, and there is ample time before trial to retain another expert, Nowak would suffer no prejudice from Cusimano’s disqualification, the DOJ argues, adding that such disqualification is necessary to prevent a conflict of interest.
Nowak’s response to the DOJ’s motion is expected to be filed by January 19, 2021.