Traders Beware: US taps new tools to find fraud in volatile commodities market

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When the U.S. Department of Justice charged a handful of JP Morgan Chase & Co traders in 2018 and 2019 with alleged commodities futures ...

When the U.S. Department of Justice charged a handful of JP Morgan Chase & Co traders in 2018 and 2019 with alleged commodities futures manipulation, it wasn't the first time the government had probed the bank's metals trading activities.

The unit is also hiring a handful of additional trial attorneys, according to the sources and online job postings. A Justice Department spokesman said the agency intends to fill the positions"promptly". The Justice Department's commodities crackdown has recently targeted"spoofing," whereby futures traders falsely create the impression of strong demand or supply and then capitalize upon the market reaction.

Around 2017, the fraud unit began developing those tools to spot known suspicious trading patterns and learn new ones by scanning a range of exchange data on bids and offers and trades, he said. Still, lawyers say the threat of criminal prosecution is a strong deterrence which has surfaced witnesses who can help the agencies refine their data tools and build other cases.

CFTC director of enforcement James McDonald declined to comment on potential probes of recent market volatility, but said the data expertise put the agency on a stronger footing than following the previous financial crisis.

 

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