The claim that JPMorgan Chase & Co. (NYSE:JPM) "fixed" silver prices has fueled heated debates among retail investors. Here's a timely look at the facts behind the controversy as silver hits new all-time highs.
- Shares of the SLV ETF are soaring. See the details here.
The conspiracy theory that gained traction in online forums, such as 4chan and Reddit's r/WallStreetBets, paints a picture of the nation's largest bank secretly controlling silver's price -- however, the truth is far more complicated.
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Market Manipulation
Between 2008 and 2016, JPMorgan and several of its traders did engage in illegal market manipulation involving precious metals, including silver -- but not in the way many online theories suggest.
Benzinga reached out to JPMorgan for comment, but did not receive an immediate response.
Spoofing
After an investigation, several U.S. regulators -- including the Department of Justice (DOJ), the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) -- found that some JPMorgan traders had engaged in a practice known as "spoofing" from 2008 to 2016, where they placed large orders for silver, gold and other metals futures they didn’t intend to execute.
The intent was to create false impressions of demand or supply, tricking other traders and influencing the market price for short-term profit.
This form of manipulation is illegal under U.S. trading laws, and several of the bank's traders were sentenced to prison for participating in the scheme.
It was not a coordinated attempt to fix silver prices at a particular level -- unlike the historical "London Gold Fix" or other classic price-fixing agreements. Instead, it was a series of deceptive trades designed to move prices momentarily, allowing traders to profit from short-term fluctuations.
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Not Price-Fixing
Regulators found that these spoofing activities did distort the markets, but they did not conclude that JPMorgan set or maintained a specific silver price over time.
In 2020, JPMorgan Chase admitted to committing wire fraud in connection with: (1) unlawful trading in the markets for precious metals futures contracts; and (2) unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.
The nation's largest bank also agreed to pay nearly $1 billion in fines to settle the investigations.
Conspiracy Theories
The gap between the legal reality and the online conspiracy arose largely from public frustration and distrust of major banks after the 2008 financial crisis. Communities such as r/WallStreetBets and r/Silverbugs -- known for their suspicion of Wall Street institutions -- interpreted JPMorgan's massive position in silver and the record fine as evidence of a broader plot to suppress silver's value.
The theories flourished on social media, especially during moments when silver prices stagnated despite inflationary fears or heavy retail buying.
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In reality, JPMorgan's wrongdoing involved unethical and illegal manipulation for trader profits, not a grand plan to keep silver undervalued.
The billion-dollar fine and criminal convictions show that regulators took the misconduct seriously.
But the notion that the bank systematically "fixed" or controlled silver prices to suppress investors is largely a myth rooted in mistrust rather than fact.
Silver Stocks and ETFs
Silver surged in October to new all-time highs above $51 per ounce, surpassing the previous highs set in January 1980 (about $49.45 per ounce) and 2011 (near $49 per ounce).
The historic rally has even seen silver briefly trade above $52.50 and $53 in London, eclipsing all prior benchmarks.
The silver rally has also led to significant attention toward silver-related equities and ETFs, like the iShares Silver Trust (NYSE:SLV), which tracks the spot price of silver.
Investors can also consider the Global X Silver Miners ETF (NYSE:SIL) which provides access to leading mining companies like Wheaton Precious Metals Corp. (NYSE:WPM) and Pan American Silver Corp. (NYSE:PAAS).
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