JPMorgan Nears Deal to Pay About $1 Billion to Settle Spoofing Probes -- 2nd Update

By Dave Michaels and David Benoit

JPMorgan Chase & Co. is nearing an agreement with federal prosecutors and regulators to pay a fine to settle civil and criminal charges that its traders rigged futures and securities markets, people familiar with the matter said.

The bank would pay about $1 billion to wrap up several investigations into whether its trading desks manipulated prices for metals and Treasury securities, one of the people said. The Justice Department's Fraud Section and regulators at the Commodity Futures Trading Commission and the Securities and Exchange Commission were involved in the probes.

The proposed agreement wouldn't put any restrictions on the bank's operations, the person said

Bloomberg News reported on the potential settlement earlier Wednesday.

The Justice Department and CFTC have been on a campaign against an illicit practice known as spoofing, which has mainly focused on wily trading in derivatives. Spoofing involves submitting misleading orders to exchanges that traders use as a ruse, according to regulators. The problematic orders are typically sent in large volume on one side of the market and quickly canceled, but create the appearance of changing supply or demand. The feint can briefly shock the market and trick others into trading at prices the spoofer wants.

A year ago three men who had worked for the bank's metals unit were arrested and charged in the probe. The indictment charged all three with crimes including racketeering, a claim that is more typically found in cases against organized-crime entities. Prosecutors later charged a fourth JPMorgan employee who worked with the bank's hedge-fund clients.

Authorities said it was the first time that defendants accused of spoofing were charged with racketeering.

In regulatory filings, JPMorgan has said it was cooperating with the investigations.

Write to Dave Michaels at dave.michaels@wsj.com and David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

September 23, 2020 17:27 ET (21:27 GMT)

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