JPM Again

A major development last week was the large amount of gold issued by JPMorgan over the first two days of the COMEX April contract. Total gold deliveries by JPMorgan of 14,326 contracts, including 10,682 contracts (1.07 million ounces) by JPM from its proprietary house account were the largest by JPM in history.  This is big news because it demonstrates clear and blatant price manipulation by JPMorgan. With more than 19,000 contracts of gold standing for delivery, what would have been the price of gold, had JPM not delivered more than 10,000 contracts from its house account? Even the dimmest of wits (say at the Justice Dept or the CFTC) should be able to conclude that without JPMorgan delivering this many gold contracts, gold prices would have had to increase enough to attract others to take JPM's place.

Price manipulation cannot occur without a concentrated position. That’s what we witnessed, in full view, by JPMorgan over the first two days of the COMEX April gold deliveries. Back in 2020, JPMorgan entered into a deferred criminal prosecution agreement (DPA) with the Justice Dept for manipulating precious metals on the COMEX (and other infractions) and agreed to pay a headline-grabbing $920 million (a pittance for JPM). The fine and the DPA only scratched the surface of JPMorgan’s long-term manipulation of silver and gold, because the case focused solely on spoofing and the short-term manipulation of prices. It ignored the much more serious price suppression of silver (and gold) and JPM’s accumulation of massive quantities of physical silver (more than a billion ounces, plus more than 30 million ounces of physical gold) over a decade. They did this while functioning as the biggest COMEX short seller (in order to keep the price down). Spoofing was peanuts compared to what JPMorgan was actually guilty of.

I always acknowledged that should JPM choose to do so, it could depress prices by releasing a portion of its physical holdings. I argued that because of the massive amount of physical silver and gold it had accumulated over the years at dirt cheap prices, JPM would choose to let prices fly upward. The recent large gold deliveries may suggest otherwise. But all may not be lost. I did suspect that if JPMorgan decided to unload some of its massive stockpile of physical silver and gold for the purpose of containing prices, that fact would quickly become obvious. That is precisely what just occurred in the COMEX April gold deliveries. A new dynamic is in play; just how blatant and obvious can it get that JPMorgan is still manipulating gold and silver prices, in complete violation of the law and its own deferred criminal prosecution agreement (whether active or recently expired), before the DOJ or CFTC is forced to react in some way?

It now seems plausible that JPMorgan's easiest way out is to sit back and cease manipulating the price of gold and silver. Continued manipulation, as demonstrated in the April gold deliveries, may eventually force even the DOJ and CFTC to react to JPMorgan's blatant price manipulation. JPMorgan ended the first quarter more than $27 billion ahead on its 30-million-ounce physical gold position and one-billion-ounce physical silver position ($21 billion in gold and $6 billion in silver).  With these and even much larger prospective profits in store on higher gold and silver prices, JPMorgan should be mindful before pulling off another blatant manipulative stunt like it just did in delivering such large quantities of gold. At some point, even the Justice Dept and CFTC will no longer be able to play dumb in the face of such cleanly manipulative shenanigans. Therefore, it seems this episode also favors some regulatory pressure to end the price manipulation, particularly in silver.

On a related matter, here’s a copy of an email I sent to the SEC, with copies to the two top officers of BlackRock, Inc., upon the release of the latest short report on stocks -

SEC Chairman Gensler,

This is the sixth time I've complained to the Securities & Exchange Commission about an obvious securities fraud and manipulation since last August that persists to this day. I've yet to receive any response from your agency explaining why the excessive (and likely concentrated) short position in SLV, the I­Shares silver trust sponsored by BlackRock, Inc., is not intentionally manipulating the price of the shares of the trust and fraudulently depriving shareholders of the metal backing promised by the prospectus.

Data just published indicate that the short position on SLV, as of March 15, increased by more than 11 million shares to 47.5 million shares, the largest short position in three months. In percentage terms, the new short position represents 9.5% of total shares outstanding – meaning that nearly one in ten shares outstanding has no metal backing, as promised by the prospectus.

The increase and overall excessive level of SLV shares shorted come two years after BlackRock amended the risk factors of the trust's prospectus to warn those who shorted shares of the risks of shorting shares of SLV in the face of growing concerns of a physical silver shortage. At that time, in Feb 2021, the short position in SLV was close to 15 million shares, which has now grown more than three­fold. Clearly, BlackRock is ignoring its own warning and has failed in its fiduciary responsibilities to protect shareholders of SLV.

There can be little doubt that those shorting shares of SLV, the largest silver ETF in the world, are doing so because the required amount of physical silver is not available to secure and deposit as required by the prospectus. This is fraudulent to existing shareholders and manipulative to the price of the shares.

In light of your recent efforts to bring transparency to the practice of short selling, with particular emphasis on concentrated short selling, the continued lack of action by your agency in unilaterally intervening or in forcing BlackRock to protect shareholders in SLV, is both bewildering and reckless. One would think that the clear regulatory failures surrounding the recent bank crisis would result in more immediate reactions to clear warnings of serious potential problems. I would implore you yet again to prompt the SEC to dig into this issue and force BlackRock to uphold its fiduciary responsibilities to shareholders of SLV.

Ted Butler

April 4, 2023

www.butlerresearch.com