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LAWRIE WILLIAMS: Precious metals markets manipulation – 3 major banks accused by CFTC

Whether the gold and other precious metals markets are manipulated by the big money, or not, is the subject of countless column inches of text in the financial media.  However the evidence of some attempts to manipulate these markets by the big banks, or individuals working for them, is becoming more and more evident.  What is perhaps less certain is whether central banks are involved too in an attempt to protect the dollar.

The latest evidence that precious metals markets, among others, are being manipulated (and what markets are not the subject of attempted manipulation by the big-money players nowadays?) comes from a report that six traders, who currently work, or previously worked for HSBC, Deutsche Bank and UBS have been subjected to criminal proceedings in the U.S. in what the Zero Hedge website calls an unprecedented cross-agency crackdown between the CFTC, DOJ and FBI seeking to punish spoofers of futures.  This was confirmed, in a CFTC press release yesterday which stated: The Commodity Futures Trading Commission today announced, in conjunction with the Department of Justice and Federal Bureau of Investigation’s Criminal Investigative Division, criminal and civil enforcement actions against three banks and six individuals involved in commodities fraud and spoofing schemes.

The CFTC statement, as well as detailing the charges being brought against the three banks, which have been fined varying amounts,  and six individuals, commented that “Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology.  The technological developments that enabled electronic and algorithmic trading have created new opportunities in our markets.”

The CFTC release went on to point out "At the CFTC, we are committed to facilitating these market-enhancing developments.  But at the same time, we recognize that these new developments also present new opportunities for bad actors.  We are equally committed to identifying and punishing these bad actors.  The CFTC’s enforcement program is built around the twin goals of holding wrongdoers accountable and deterring future misconduct.  We believe these goals are best achieved when we hold accountable not just companies, but also the individuals involved.  As these cases show, we will work hard to identify and prosecute the individual traders who engage in spoofing, but we will also seek to find and hold accountable those who teach others how to spoof, who build the tools designed to spoof, or who otherwise aid and abet the wrongdoing.  These cases should send a strong signal that we at the CFTC are committed to identifying individuals responsible for unlawful activity and holding them accountable.”

Followers of the precious metals markets will be well aware that seemingly every time precious metals prices surge there seems to be contrary action in the futures markets which stops this activity in its tracks – notably the apparent sales of large amounts of the metal aimed at bringing prices back down.  It’s bad enough if these are real transactions, but if they are being spoofed it means the traders involved carry no risk (apart from that of criminal prosecution which is, to say the least an uncommon experience.)

It is perhaps notable that all three banks involved in the latest accusations are non-U.S. entities, yet suspicion is that the biggest banks thought to be participating in strange futures markets activities, seemingly designed to suppress prices, are U.S. concerns.  This leads to suggestions that, if true, either the U.S. institutions are cleverer at concealing their (criminal) activities, or that the U.S. regulators are turning a blind eye to what seems to have become common practice among the domestic financial sector.  Given that most of the regulators have come from the sector they are supposedly regulating, perhaps that is not too surprising.

But what the latest moves by the regulators does show is that the big money carries on implementing a degree of market manipulation activity regardless of attempts (seemingly ineffective ones) to control these kinds of activities.  The big banks, if caught out, will often plea bargain their way out and pay massive ‘fines’ usually without actually admitting guilt.  And these ‘fines’ are, as we have stated before, cynically seen as a cost of doing business given that the financial rewards from the activities are usually far in excess of the ‘fines’ paid.  That seems to be the modern capitalist business ethos!

30 Jan 2018

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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