Follow Up on the Silver Market Manipulations

On March 27th and March 29th I presented materials concerning evidence that was presented to the CFTC concerning whistle-blower and London trader Andrew Maguire and his various emails to Eliud Ramirez, a senior investigator for the CFTC‘s Enforcement Division.  These emails contained evidence that reported the illegal manipulation of the silver market by traders at JP Morgan Chase. Maguire told the CFTC how silver traders at JP Morgan Chase openly bragged about their exploits – including how they sent a signal to the market in advance so that other traders could make a profit during price suppression episodes. Traders would recognize these signals and would make money shorting precious metals alongside JP Morgan Chase.  Maguire explained to the CFTC how there would routinely be market manipulations at the time of option expires, during non-farm payroll data releases, during commodities exchange contract rollovers, as well as at other times if it was deemed necessary.

The video of the hearing in which this evidence was presented clearly demonstrates that the CFTC had no interest in pursuing this issue.  We were outraged when we learned a few days later Maguire and his wife were run down by an automobile shortly after Maguire’s return to London.  They are fine now. While it seems the CFTC is not going to pursue these allegations of racketeering, several investors are pursuing lawsuits to uncover the evidence.

According to  Bloomberg News, HSBC Holdings Plc and JPMorgan Chase & Co. were accused in an investor’s lawsuit of placing “spoof” trading orders to manipulate silver futures and options prices in violation of U.S. antitrust law.

The investor, Peter Laskaris, alleges that starting in March 2008, the banks colluded to suppress silver futures so that call options, or the right to buy, would decline, and put options for the right to sell would increase, according to the complaint filed yesterday in federal court in Manhattan. The collusion was also intended to maintain prices at levels at which some options would expire as worthless, Laskaris claims.

The banks placed so-called spoof trading orders, or the “submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed,” according to the complaint.

The Commodity Futures Trading Commission began probing allegations of price manipulation in the silver futures market in September 2008. At a hearing in Washington on Oct. 27, CFTC Commissioner Bart Chilton said there have been “fraudulent efforts to persuade and deviously control” silver prices and that violators should be prosecuted.  Joseph Evangelisti, a spokesman for New York-based JPMorgan, declined to comment. Juanita Gutierrez, a spokeswoman for London-based HSBC, also declined to comment.

A separate, similar complaint filed yesterday on behalf of investor Brian Beatty, and naming the same banks as defendants, claims a whistleblower contacted the CFTC last year and reported the banks’ conspiracy to suppress prices of silver futures to profit from “enormous” short positions in silver futures.

The banks reduced their collusive trading and their holdings in the futures market after a government investigation of silver futures manipulation began in March, according to the complaint filed by Laskaris, which seeks class-action status. Since the banks cut back on their silver futures trading, prices have increased about 50 percent, the suit alleges.

“These price changes directly result, at least in one substantial part, from defendants’ reduction in their concentration and other reductions of their unlawful activities in the silver markets since the government investigation,” according to the Laskaris complaint.

What is truly sad here is that the CFTC has utterly failed to act, even when the evidence was overwhelming as to what banks were conducting the fraudulent trading practices, down to the specific employee names.  Even when Maguire even in one email predicted what was GOING to happen on the next trading cycle and exactly what he said happened.  Even when pressured, the banks pulled back and the price of silver found it true value by 50%!

Our economic reality is still tied to these banksters and their unabashed audacious belief they are in charge.  Real global financial reform is the ONLY action that is going to be effective.  Our political involvement should extend well beyond the mid-term elections in the US and the recent elections in the UK and the EU.

Every one of these governments is or will soon ask us all to suck up it one more time.  Our collective response should be sure, just as soon as you reign in the bankers and fix the causes of the whole damn thing in the first place.  I just think nothing less will have a chance of working within the next few years.