The trial faced by the JPMorgan Chase and Co. precious metals head in the US court has revealed insights into its trading desk that dominates the global gold market.
Michael Nowak and his colleagues Jeffrey Ruffo and Gregg Smith ran the precious metal trading at JPMorgan for a decade. They are now being tried to manipulate the silver and gold market. The proceedings in Chicago revealed insights into the business’s inner workings, largest clients, profitability, and market share. The focus is on the jury now, who began their deliberations on Friday.
Annual Profits
It was the first time detailed information on the bank’s earnings was made. Internal figures were shown to the court on how much profits were made from precious metals. JPMorgan’s earning reports usually never break up the results and shows income from the metals desk or commodities unit.
A spokesperson of JPMorgan declined to comment on the disclosures made in the trial.
Metals trading, in short, is a consistent moneymaker for JPMorgan. It has given annual profits ranging from $109 billion to $234 billion from 2008 to 2018. While the bank does physical business substantially, the lion’s share of its income comes from financial market trading. JPMorgan makes an average of $30 million a year in the trading and transporting of precious physical metals.
The profits disclosed during the trial have been overshadowed recently. In 2020, drying the pandemic, the bank made a $1 billion profit from precious metals because of more arbitrage opportunities.
Market Share
JPMorgan has billions of gold in New York, London, and Singapore vaults. The gold prices are set globally by buying and selling gold held in London vaults, including the Bank of England ad JPMorgan. Out of the four clearing members of the London gold market, JPMorgan is one of them.
JPMorgan is the dominant player in the precious metal market, including a small group of bullion banks. Prosecutors showed internal documents that gave a glimpse of the dominant role of JPMorgan. In 2010, JPMorgan handled about 40% of all the gold market transactions.
The employees who handled the precious metals desk were rewarded handsomely by JPMorgan. Jurors were shocked when they were told in court how much was earned by the defendants.
Jeffery Ruffo earned 10.5 million dollars from 2008 to 2016 as the hedge fund salesman of JPMorgan. Greg Smith earned $9.9 million as the top gold trader while their bass Nowak made the most, and he got $ 23.7 million during the same period.
JPMorgan’s Key Clients
Hedge funds such as Tudor Investment, George Soros, and Moore Capital were some of the most important clients for the desk. Retaining Ruffo after JPMorgan acquired Bear Stearns was to get access to these high-profile clients. This was disclosed by Christian Trunz, an ex-trader who testified against his ex-bosses. He referred to Ruffo as one of the best salespeople on Wall Street.
