JPMorgan Gold Trader Convicted of Whistle blower and Admits To Lies

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(Bloomberg) — When FBI agents knocked on the door of his Brooklyn, New York, home in August 2018, trader John Edmonds told them he didn’t know anything about gold and silver price manipulation at JPMorgan Chase & Co. That was a lie, he admitted Thursday.

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Edmonds was a JPMorgan employee for over ten years. He eventually pleaded guilty and agreed that he would cooperate with the prosecutors. He’s now a key government witness against his former boss, Michael Nowak, the longtime head of the precious-metals trading desk; gold trader Gregg Smith; and hedge fund salesman Jeffrey Ruffo.

During two days of testimony at a criminal trial in Chicago, Edmonds described how the three senior executives routinely used “spoof” trades — huge orders that are quickly canceled before they can be executed — to push precious metals up or down from 2008 to 2016 to make trades for the bank and its clients more profitable. Edmonds stated that he learned how to spoof at JPMorgan.

But Nowak’s defense lawyer David Meister, over several hours of cross examination Thursday, sought to undermine the credibility of Edmonds, who testified earlier that he’d committed no crimes since leaving JPMorgan in 2017.

Meister interviewed Edmonds about the FBI interview in 2018 and played a recording of the encounter by the agents.

“I don’t know what was going on in the market at that time,” Edmonds can be heard saying on the recording played for the jury. “Not spoofing, no manipulation. Like, that’s not what we do.”

In federal court on Thursday, the former trader said he didn’t know lying to an FBI agent was a crime and regretted doing so. “I owned up to what I did, it’s what happened and the penalties are the penalties,” Edmonds said.

Read More: JPMorgan Gold Desk ‘Spoofing’ Cheated Market, Ex-Trader Says

Meister also brought up comments by Edmonds under oath during a deposition he gave in a lawsuit against JPMorgan, after he’d left the bank. At the time, the former trader told federal authorities he didn’t know why one of his colleagues was fired in 2013. Edmonds later admitted to Edmonds that Nowak had told Edmonds in a meeting just after the firing that his former colleague had been fired for spoofing.

“You lied to the deposition, you lied to the FBI,” Meister said. “That’s two crimes committed after you left JPMorgan.”

Edmonds has been on Tuesday’s witness stand. He was originally hired for a salary around $80,000 in 2008 and was making approximately $300,000 per year until 2017, when he quit the bank and took a severance payout of roughly $157,000.

On Friday, During cross-examination by Smith’s attorney, Jonathan Cogan, Edmonds admitted he also lied on his 2017 severance agreement with JPMorgan, which included a requirement that he disclose any violations of the bank’s code of conduct that he was aware of.

Edmonds testified that while he signed the document saying there were no violations that he was aware of, “that was a lie.” He added that he has been telling the truth since he agreed to plead guilty and cooperate with prosecutors.

During followup questioning by prosecutor Avi Perry, Edmonds said that when he had testified about not committing any crimes since leaving JPMorgan, he thought the defense lawyer was asking about “spoofing and trading,” and not his conversations with FBI agents or his deposition.

Trade Record

Also under scrutiny was Edmonds’s trading record. According to Thursday’s defense lawyers, he lost $39,000 per year between 2009-2013. Edmonds stated on Friday however that he earned millions of dollars from the bank’s trading books, which he managed along with other traders, in later years. He made $12 million in 2014 alone.

“Early on in my career, I lost money,” Edmonds said. “That was a learning curve,” and “over time I started to make more money, I started to get better,” he said.

The annual profit of JPMorgan’s precious metals desk varied, but it never dipped below $100 million between 2007 and 2018, according to data presented by Meister. In its best year, it earned more than twice as much.

Continue reading: Spoofing is a silly name for serious market rigging

US v. Smith et al., 19-cr-01669, US District Court Northern District of Illinois (Chicago).

(Updates on Friday testimony during interrogation by the prosecutor.

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