A NEW SILVER ISSUE FOR THE JUSTICE DEPARTMENT
It’s been four months since the U.S. Department of Justice secured a criminal guilty plea from a former JPMorgan trader for spoofing and manipulating precious metals prices on the COMEX. The Justice Department made it clear that it was engaged in an ongoing investigation into COMEX precious metals trading by no less than three important divisions within the agency; the Criminal Division, the Federal Bureau of Investigation (FBI), and the U.S. Attorneys Office.
In addition, the Antitrust Division of the DOJ should also be involved in the current investigation. Incontrovertible evidence in the COT report indicates serious violations of monopoly and restraint of trade issues in COMEX silver futures. As of the close of business on Feb. 5, the 8 largest traders on the short side of COMEX silver futures held a net (pure) short position of more than 100,000 contracts, the equivalent of more than 500 million ounces of silver, or 60% of total world annual mine production. The 4 largest traders average more than 90 million ounces short per trader, while the 8 largest traders hold short position of 62.5 million ounces per trader.
The issue for the Antitrust Division of the Justice Department is what the effect of the pure short sale by speculating banks (led by JPMorgan) of 60% of world silver mine production has on price. The basic role of the Division is to insure that monopolistic forces don’t interfere with the workings of the free market. A free market is defined by competition by as many market participants as possible. A world commodity such as silver would require more than 4 or 8 large traders to be considered free. If the concentrated short position of 500 million ounces of the 8 largest traders didn’t exist, the price of silver would be substantially higher. In a nutshell, that’s prima facie proof of manipulation.
Another question the Antitrust Division should ask is how this concentrated silver short position has been allowed to exist and what do the existing regulators, the CFTC and the CME Group, say to allegations that this is proof of manipulation? After all, no commodity has a concentrated short position that comes close to COMEX silver when compared to actual world production, consumption and inventories. When it comes to concentrated short positions, COMEX silver is in a class of its own. The only answer the CFTC and the CME Group have been able to mumble, on those rare past occasions when they even bothered to respond (not in the last ten years), is that the big concentrated short traders are just making markets and providing liquidity. Commodity markets are designed to be open auction markets, not run by market makers and the only liquidity provided is naked short selling designed to cap prices. The Antitrust Division would be able to see right through this bogus response.
The issue is clear – for decades a handful of large traders (mostly banks) have conspired to manipulate silver prices by selling short massive and concentrated quantities of COMEX futures contracts in any amount necessary to cap prices. JPMorgan has been the ringleader, backstopper and main beneficiary of the manipulation, greatly expanding its unfair advantage by conniving to accumulate physical silver at depressed prices over the past 8 years. Should the Justice Department, and its Antitrust Division, fail to act against this crime, the conspiring manipulators will have pulled off the financial crime of all time.
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