JP Morgan (JPM) can breathe easier today having avoided charges of a silver manipulation scheme; just one in the line of many claims of less-than-ethical practices from one of the “Big Four”. A judge found that the case offered compelling evidence, but when all was said and done, failed to present any material evidence that JPM was specifically involved in the manipulation of the COMEX silver markets [for more silver news and analysis subscribe to our free newsletter].
The lawsuit was brought on by 44 plaintiffs who claimed that JPM and unnamed subsidiaries worked together to manipulate the COMEX silver prices on “June 26, 2007 and between March 17, 2008 and October 27, 2010,” writes Michelle Smith. The suit alleged that traders among the accused bragged about their ability to move the markets and profit, eerily reminiscent of the Enron days and the market manipulation that took place then.
Where the Case Fell Apart
The biggest issue with sticking JPM with the charges is proving manipulation. Smith notes that in order to prove manipulation “the accused must have the ability to manipulate the market in question and exhibit specific intent to do so. There must also be an artificial price and the accused must be the ‘proximate cause’ of that price.” JPM’s ability to manipulate the market was easy to prove and a claim that the company itself did not deny. But as for the remaining three factors of manipulation, the evidence was simply not specific enough to warrant any formal charges [see also 25 Ways To Invest In Silver].
With no proof of an artificial price, the case had to be dismissed. The only question that remains is what actually happened and whether or not the silver markets were actually manipulated. This, of course, is not the first time that there has been an accusation of price skewing in the precious metals space, as silver has been that subject of several schemes along with gold.
The biggest problem with these cases is that they are usually lobbied against some of the biggest names in finance who, arguably, have the ability to sometimes cover their tracks. The cruel reality is that a select few have the innate ability to dominate commodities markets if they so choose, and it is quite difficult to bring any meaningful legal action against them. What do you all think, was JPM guilty of market manipulation or was this case blown out of proportion?
Disclosure: No positions at time of writing.