JPMorgan Must Wait For Decision On $60M Spoofing Settlement

A federal judge in Manhattan decided Monday that he would need clearer details before approving JPMorgan Chase’s $60 million settlement with a proposed class of traders who alleged they were harmed by the banking giant’s scheme to manipulate the precious metals futures market.

JPMorgan ChasePhoto Credit: Shutterstock

U.S. District Judge Gregory H. Woods presided over the virtual conference and voiced a number of concerns with the proposed deal to end six consolidated investor lawsuits against JPMorgan and three of its former traders. The pile of litigation originated with criminal allegations against the traders accusing them of “spoofing”, an illegal technique where traders place and later cancel futures orders, creating the false appearance of demand.

Judge Woods raised issue with the allotment of the $60 million fund between investors depending on when they traded on gold or silver futures contracts. He asked lawyers to explain how they calculated the worth of certain trading days.

“There’s no way for me to get behind those numbers, and more importantly there’s no way for potential class members to get behind those numbers,” the judge said.

Representation for the plaintiffs agreed to provide Judge Woods with documentation detailing the calculation of which trade dates, spanning from 2008 to 2016, were allegedly impacted by spoofing.

The judge also raised questions about the deal’s requirement that investors must produce evidence of their trades to opt out of the class. Counsel for both sides agreed to discuss tweaking the language to assuage these worries.

Judge Woods’ final concern was related to the advertising strategy outlined in the settlement notice plan. He specifically asked class counsel to produce a sworn statement explaining why they decided to advertise the settlement only in the U.S. and Canada, even though they are aware the proposed class includes investors from countries across the globe.

“I came away with the impression that this plan was not thinking conscientiously about the rest of the world,” the judge noted. “The fact that you can’t tell me why it is that you prioritized Quebec over China or Europe just heightens that concern.”

If approved, the settlement would effectively end the slew of civil actions filed against JPMorgan trader John Edmonds in 2018 that followed his guilty plea to spoofing the metals futures market for almost six years.

In September 2020, JPMorgan agreed to pay a more than $920 million criminal penalty over the spoofing scandal as part of a deferred prosecution agreement with the U.S. Department of Justice.

Several lawsuits focusing on JPMorgan traders’ alleged spoofing were consolidated in October 2020. In September of this year, the lender agreed to pay $16 million to close out the proposed class claims.

Currently four former JPMorgan traders are fighting criminal racketeering charges in Illinois federal court.

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