Former JPMorgan traders seek to prevent govt from revising versions of offense conduct
Former JPMorgan traders Gregg Smith and Michael Nowak, convicted of fraud and spoofing, seek to prevent the US Government from revising its versions of the offense conduct.
This becomes clear from documents filed by the defendants with the Illinois Northern District Court.
Smith and Nowak jointly move the Court for an order barring the government from what the traders call a “belated and unfair attempt to revise its versions of the offense conduct”. According to the defendants, the government should not be permitted to violate the Court-ordered deadline and expand its versions of the offense conduct now, three months late, with the presentence reports and sentencing memoranda due in a matter of weeks.
On December 22, 2022, three months after the September 21, 2022 deadline, and without seeking the Court’s leave or Defendants’ consent—the government submitted to the Probation Office a declaration of Prof. Venkataraman, more than twice the length of each of its versions, and containing broad, unclear, and novel analyses of a vast universe of purported spoofing sequences, which Defendants would need to parse and reproduce to be in a position to address. The government provided no explanation why it failed to meet the Court’s September 21, 2022 deadline.
The traders argue that the government’s attempt to circumvent the Court-ordered deadlines by revising its versions of the offense conduct now—amidst the end-of-year holidays and with mere weeks to go before the presentence reports and sentencing memoranda are due—unfairly prejudices the defendants, who, on the current schedule, will not have an adequate opportunity to respond, including because the Probation Office will not have time to fairly consider such responses in preparing and finalizing the presentence reports.
That is why, the traders request that the Court bar the government from revising its versions of the offense conduct at this late stage.
Let’s recall that, in August 2022, a federal jury in the Northern District of Illinois convicted Smith and Nowak, former precious metals traders at JPMorgan Chase & Co., of fraud, attempted price manipulation, and spoofing in a multi-year market manipulation scheme of precious metals futures contracts that spanned over eight years and involved thousands of unlawful trading sequences.
According to court documents and evidence presented at trial, Gregg Smith was an executive director and trader on JPMorgan’s precious metals desk in New York. Michael Nowak was a managing director and ran JPMorgan’s global precious metals desk.
The evidence at trial showed that between approximately May 2008 and August 2016, the defendants, along with other traders on the JPMorgan precious metals desk, engaged in a widespread spoofing, market manipulation, and fraud scheme. The defendants placed orders that they intended to cancel before execution in order to drive prices on orders they intended to execute on the opposite side of the market.
The defendants engaged in thousands of deceptive trading sequences for gold, silver, platinum, and palladium futures contracts traded through the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX), which are commodities exchanges operated by CME Group Inc. These deceptive orders were intended to inject false and misleading information about the genuine supply and demand for precious metals futures contracts into the markets.
Following a three-week trial, Smith was convicted of one count of attempted price manipulation, one count of spoofing, one count of commodities fraud, and eight counts of wire fraud affecting a financial institution. Nowak was convicted of one count of attempted price manipulation, one count of spoofing, one count of commodities fraud, and 10 counts of wire fraud affecting a financial institution.