Robert Gottlieb, who is currently a Managing Director/Trader at JP Morgan and an alleged participant in the manipulation is brought up in the lawsuit.  What is interesting about Mr. Gottlieb is that in February of 2008 he made the following statement, “If you take just 1-2% of hard asset pension fund money earmarked for commodities and put that into gold, you can project much higher prices in the future than even where we are today.”  The timing of the statement is so interesting because at the time Bear Stearns was massively short silver and the firm collapsed within weeks of his comments. 

Guess who inherited that massive silver short position?  You got it, JP Morgan.  Not only did they pick up the massive silver short position, but they also picked up Mr. Gottlieb in the deal as you can see.

Stay tuned as we will have more interviews and comments from key people regarding the JP Morgan lawsuit.

Below are some critical portions from the lawsuit against JP Morgan that King World News was able to obtain.  This is a 104 page document, so we just wanted to highlight key points from the suit:

  1. 1. Unlawful conduct. “Defendants combined, conspired and agreed to restrain trade in, fix, and manipulate prices of silver futures and options contracts traded in this District on the Commodity Exchange Inc. (“COMEX”) division of the New York Mercantile Exchange (“NYMEX”).  Defendants thereby have violated Section 1 of the Sherman Act.

Also during the Class Period, certain of the Defendants, including JP Morgan, have intentionally acted to manipulate prices of COMEX silver futures and options contracts.

  1. 2. Purpose and Means.  Defendants have effected their foregoing restraint of trade and manipulations in order to profit themselves.  Defendants have caused declines in the price of COMEX silver, and COMEX options, and also stabilized such prices through diverse means.  These means include (a) a dominant and manipulative short positions and market power manipulation; (b) repeated manipulative and uneconomic trades and trade manipulation; (c) false trades made to facilitate a trade manipulation; and (d) other acts.

  1. 3. Market Power Manipulation. (a) JP Morgan, gradually acquired control, between March 17, 2008 and August 2008, of an enormously large ounce short position in COMEX silver futures and silver that previously was held by Bear Stearns.  This short position and JP Morgan’s existing COMEX short silver positions gave JP Morgan substantial market power in COMEX silver futures contracts.

  1. 4.Manipulative and Uneconomic Trades (a) During the Class Period, JP Morgan also made large manipulative trades that repeatedly caused sudden, unreasonable and artificial fluctuations in COMEX silver prices which profited JP Morgan.  (b) One of these episodes occurred on August 14 and 15, 2008.  JP Morgan’s trades caused a very large decline of almost $1.41 per ounce, or approximately 12%, in COMEX silver futures.  This represented an approximately $220,000,000 increase in the value of JP Morgan’s COMEX silver short positions.

  1. 7. CFTC Commissioner Comment (a) Such depressions of the prices of COMEX silver futures through large uneconomic trades created benefitted JP Morgan’s extraordinarily large COMEX short position. (c) Also, these types of trades were reported to the CFTC by other persons.  Plaintiffs further specifically allege that Commissioner Bart Chilton made public statements, including on October 26, 2010, to the effect that he believed there had been manipulation or related unlawful conduct in the COMEX silver futures market.  “I believe that there have been repeated attempts to influence prices in the silver markets.  There have been fraudulent efforts to persuade and deviously control that price.  Based on what I have been told by member of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.”  Bart Chilton

  1. 58. JP Morgan executed its trades on this day through, at least, a futures floor broker named Marcus Elias.  Marcus Elias was a former classmate and wrestling teammate of Chris Jordan, a senior silver trader at JP Morgan.  After the close of floor trading on June 26, 2007, Marcus Elias acknowledged that he had executed purchase trades for JP Morgan at or near the lows of the market.  Marcus Elias also executed sell orders on behalf of JP Morgan in the morning, which contributed to the price declines, and then purchased futures on behalf of JP Morgan subsequently as the market bottomed.

  1. 65. Through its trading conduct on this day, JP Morgan intended to force traders who were short out of the money puts to cover their positions.  As options on July futures approached expiration, JP Morgan had no fundamental reason to believe there would be a price move downward.  Yet JP Morgan maintained its put positions until the last available day to trade these options - an economically unjustifiable action because at expiration the options would expire out of the money and worthless.  However, by virtue of this large put options position, JP Morgan knew that a large and less capitalized segment of the market was conversely short options.  So, rather than simply liquidate its out of the money positions at a loss, JP Morgan sold futures into the market and placed “spoof” orders to generate widespread panic.  This selling forced panicked traders to systematically sell silver futures.  As discussed below, this conduct was repeated again in August 2008.

The suit also names Robert Gottlieb who came to JP Morgan from Bear Stearns along with a massive silver short position which JP Morgan inherited from Bear Stearns:

  1. c. JP Morgan’s Communications with HSBC 

  1. 88. Between 1996 and 2000, Robert Gottlieb, Christopher Jordan and Michael Connolly worked together at the Precious Metals Trading Desk of HSBC and at Republic National Bank of New York, prior to its acquisition by HSBC.  89.  In 2006, Jordan began his employment at JP Morgan where, until 2010, he was one of JP Morgan’s principal COMEX silver futures and options traders.  90.  After a brief stint at Bank of America as a commodities trader, Mike Connolly returned to HSBC in 2007, where he served as Senior Vice President of HSBC’s Precious Metals Desk.  91.  In March 2008, Robert Gottlieb began his employment at JP Morgan Chase where he presently serves as a Managing Director/Trader.  92.  Prior to JP Morgan’s acquisition of Bear Stearns in 2008, Mr. Gottlieb had worked for Bear Stearns from January 2006 forward.  93.  Bear Stearns, through Robert Gottlieb and others, had developed the previously alleged large Bear Stearns short position in COMEX silver futures prior to March 17, 2008.  94.  Contrary to standard antitrust compliance manuals, Mr. Gottlieb regularly spoke to, and communicated and met with HSBC silver trader Mike Connolly from the time that Mr. Gottlieb joined JP Morgan until at least October 2010.

  1. d. JP Morgan’s Motive and Financial Incentive to Cause Lower COMEX Silver Futures Prices From The Second Quarter Of 2008 Forward. 

  1. 95. By the second quarter of 2008 and continuing thereafter through the end of the Class Period, JP Morgan possessed a large financial incentive to cause lower COMEX silver futures prices.  Lower COMEX silver prices caused the mark to market value of JP Morgan’s short COMEX silver positions to increase.  The amount of the increase in the value of JP Morgan’s short COMEX silver short positions was at least $100,000,000 and was as much in excess of $150,000,000 for each $1 decline in COMEX silver prices.

  1. 116. According to other witnesses as well, on or before August 15, 2008, brokers who often executed trades for JP Morgan accumulated a significant number of September puts that were well out of the money.  117.  As prices decreased, these September puts became much closer to being in the money.  Accordingly, those who had been selling these puts had to close out their positions by buying back the September puts on August 15, 2008.  118.  Chris Jordan at JP Morgan was selling back large amounts of September puts on August 15 at an enormous profit. 

  1. 124. In his communications with the CFTC, the whistleblower described how JP Morgan signaled its co-conspirators in advance of the manipulation, so that JP Morgan along with its co-conspirators, could reap enormous profits by artificially and unlawfully suppressing and manipulating the price of COMEX silver futures and options contracts.

The Whistleblower mentioned there at the end is Andrew Maguire.  To listen to the first ever interview regarding silver manipulation with Silver Whistleblower Andrew Maguire from March 30, 2010 CLICK HERE.

© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

Eric King

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rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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