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JPMorgan Gold Trader Turned Whistle-Blower Admits to Lies

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(Bloomberg) -- When FBI agents knocked on the door of his Brooklyn, New York, home in August 2018, trader John Edmonds told them he didn’t know anything about gold and silver price manipulation at JPMorgan Chase & Co. That was a lie, he admitted Thursday.

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Edmonds, who worked at JPMorgan for about a decade, eventually pleaded guilty to conspiracy and commodities fraud and agreed to cooperate with prosecutors. He’s now a key government witness against his former boss, Michael Nowak, the longtime head of the precious-metals trading desk; gold trader Gregg Smith; and hedge fund salesman Jeffrey Ruffo.

During two days of testimony at a criminal trial in Chicago, Edmonds described how the three senior executives routinely used “spoof” trades -- huge orders that are quickly canceled before they can be executed -- to push precious metals up or down from 2008 to 2016 to make trades for the bank and its clients more profitable. Edmonds said he learned how to spoof at JPMorgan.

But Nowak’s defense lawyer David Meister, over several hours of cross examination Thursday, sought to undermine the credibility of Edmonds, who testified earlier that he’d committed no crimes since leaving JPMorgan in 2017.

Meister questioned Edmonds about his FBI interview in 2018, and played a recording of the encounter made by the agents.

“I don’t know what was going on in the market at that time,” Edmonds can be heard saying on the recording played for the jury. “Not spoofing, no manipulation. Like, that’s not what we do.”

In federal court on Thursday, the former trader said he didn’t know lying to an FBI agent was a crime and regretted doing so. “I owned up to what I did, it’s what happened and the penalties are the penalties,” Edmonds said.

Read More: JPMorgan Gold Desk ‘Spoofing’ Cheated Market, Ex-Trader Says

Meister also brought up comments by Edmonds under oath during a deposition he gave in a lawsuit against JPMorgan, after he’d left the bank. At the time, the former trader told federal authorities he didn’t know why one of his colleagues was fired in 2013. But on Thursday, Edmonds admitted that Nowak had told him in a meeting shortly after the firing that the former colleague had lost his job for spoofing.

“You lied to the deposition, you lied to the FBI,” Meister said. “That’s two crimes committed after you left JPMorgan.”

Edmonds, who has been on the witness stand since Tuesday, was hired at a salary of about $80,000 in 2008, and was earning about $300,000 annually by 2017, when he left the bank and took a severance buyout of about $157,000.

On Friday, During cross-examination by Smith’s attorney, Jonathan Cogan, Edmonds admitted he also lied on his 2017 severance agreement with JPMorgan, which included a requirement that he disclose any violations of the bank’s code of conduct that he was aware of.

Edmonds testified that while he signed the document saying there were no violations that he was aware of, “that was a lie.” He added that he has been telling the truth since he agreed to plead guilty and cooperate with prosecutors.

During followup questioning by prosecutor Avi Perry, Edmonds said that when he had testified about not committing any crimes since leaving JPMorgan, he thought the defense lawyer was asking about “spoofing and trading,” and not his conversations with FBI agents or his deposition.

Trading Record

Also under scrutiny was Edmonds’s trading record. Between 2009 and 2013 he averaged an annual loss of $39,000, according to data shown by defense lawyers Thursday. However, Edmonds said on Friday that in later years he was earning millions of dollars for the bank from trading books he managed with others, including about $12 million in 2014.

“Early on in my career, I lost money,” Edmonds said. “That was a learning curve,” and “over time I started to make more money, I started to get better,” he said.

The annual profit of JPMorgan’s precious metals desk varied, but it never dipped below $100 million between 2007 and 2018, according to data presented by Meister. In its best year, it made more than double that.

Read More: Spoofing Is a Silly Name for Serious Market Rigging

The case is US v. Smith et al, 19-cr-00669, US District Court, Northern District of Illinois (Chicago)

(Updates with Friday testimony during questioning by prosecutor.)

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