The United States Department of Justice (DOJ) is pushing for extending the stay of a civil action accusing JPMorgan and several of its traders of spoofing. This becomes clear from documents filed by the DOJ with the New York Southern District Court on May 15, 2021.

The document, seen by FX News Group, states that the Government is asking for a fourth extension of the stay of the consolidated civil action that is set to expire on May 30, 2021. The United States requests that the Court extend the current stay through December 15, 2021, which will extend the stay past the expected conclusion of a related criminal prosecution pending – United States v. Smith, et al., Case No. 19 CR 669 (N.D. Ill.).

The criminal case arises from substantially the same conduct, events, and time period as the allegations in the consolidated civil action.

The criminal prosecution was launched in 2019. In the criminal case, DOJ targets former head of JPMorgan’s precious metals desk Michael Nowak, as well as 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.

In its motion filed on May 15, 2021, the DOJ suggests that extending the stay would benefit the Court and all parties by minimizing redundant litigation, narrowing the scope of discovery and issues to be adjudicated in the civil case, and relieving potential defendants of the choice of having to potentially invoke their rights against self-incrimination.

The civil action arises from the defendants’ unlawful and intentional manipulation of gold, silver, platinum, and palladium futures contracts and options on such contracts traded on NYMEX and the COMEX from approximately January 1, 2009 through December 31, 2015 in violation of the Commodity Exchange Act, 7 U.S.C. §§ 1, et seq. (the CEA) and the common law.

The defendants in the civil action are a group of precious metals traders and JPMorgan – their employer.

The defendants allegedly manipulated the prices of NYMEX and COMEX precious metals futures and options contracts during the Class Period using a technique called “spoofing” whereby they routinely placed electronic orders to buy and sell such futures contracts with the intent to cancel those orders before execution (“spoof orders”).

Such spoof orders injected materially false and illegitimate signals of supply and demand into the market and were intended to induce other market participants to trade against the defendants’ genuine orders (i.e., orders that Defendants did want to execute) on the opposite side of the market from the spoof orders at prices, quantities, and times at which the plaintiffs and the other market participants otherwise would not have traded.

Accordingly, the spoof orders were designed to, and did, artificially move the prices of NYMEX and COMEX precious metals futures and options contracts during the Class Period in a direction that was favorable to the defendants but unfavorable to the plaintiffs.