JP Morgan CEO Jamie Dimon has frequently let his feelings on Bitcoin be known, but the news yesterday that one of his traders pled guilty to manipulating the price of various metals leaves him open to accusations of hypocrisy. John Edmonds, who had been at the bank for thirteen years, yesterday admitted to one count each of conspiracy to commit wire fraud, price manipulation and spoofing, and one count of commodities fraud. This is following a seven-year price manipulation scheme involving gold, silver, palladium, and platinum futures. The primary way Edmonds did this was to use “spoof” trading, or placing orders he intended to cancel in order to intimate a false price for the commodity.
Who’s the Real Fraud?
Bitcoin – and cryptocurrency in general – was labelled a fraud by Dimon back in September 2017. Since then JP Morgan have been outed for paying a $5.1 billion mortgage fraud fine with proceeds gained by committing more mortgage fraud, paid billions to cover up the release of documents criticizing the,m and included in a list of banks who are said to have committed the “biggest tax fraud in Europe’s history”.
More worrying for Dimon is the allegation from the Department of Justice that “Edmonds admitted that he learned this deceptive trading strategy from more senior traders at the Bank, and he personally deployed this strategy hundreds of times with the knowledge and consent of his immediate supervisors.” When set against that context, Dimon’s claims that Bitcoin is a fraud appear to ring very hollow indeed.
CME Futures Concern
Slightly worryingly for Bitcoin supporters is that fact that Edmonds and his colleagues committed these crimes using futures contracts on the CME exchange, to which Bitcoin was added in December 2017. If such gross price manipulation can exist on established platforms such as precious metals, it has to be a concern what rogue traders could do with a new and volatile asset class such as Bitcoin.
Cryptocurrency is not immune to price manipulation, and indeed is one of the reasons behind the decision to not yet grant a Bitcoin ETF. Yet, steps are being taken by regulators to clean up the space and prepare for institutional money, while more established markets continue to struggle with illegal activities.