A four-year investigation into the possible manipulation of the the
silver market looks increasingly likely to be dropped after US
regulators failed to find enough evidence to support a legal case,
according to three people familiar with the situation.
The Commodity Futures Trading Commission first announced that it was
investigating “complaints of misconduct in the silver market” in
September 2008, following a barrage of allegations of manipulation from
a group of precious metals investors.
In 2010, Bart Chilton, a CFTC commissioner, said that he believed there
had been “fraudulent efforts” to “deviously control” the silver
price.
But after taking advice from two external consultancies, the first of
which found irregularities on certain trading dates that it believed
deserved more analysis, CFTC staff do not have sufficient evidence to
bring a case, according to the people familiar with the situation.
The agency’s five commissioners have not yet formally determined the
outcome of the investigation, leaving the possibility that staff could
be instructed to dig deeper. A CFTC spokesman said: “The investigation
has not reached its conclusion”. He declined further comment.
Ending the probe would infuriate some US silver investors, who claim
that a group of large investment banks – in particular, JPMorgan – has
conspired to drive the price of silver lower.
“I’m sure it will be met with some concern from a certain group of
aggressive silver speculators,” said one person familiar with the
investigation.
In a recent blog post, Ted Butler, a newsletter publisher and unofficial
champion for the silver investors, accused the CFTC of being
“negligent in failing to terminate the obvious manipulation ongoing in
silver”.
The CFTC has analysed over 100,000 documents and interviewed dozens of
witnesses since it began investigating the market in 2008, it said last
year. The people familiar with the situation said the evidence
included records from JPMorgan.
The conclusion of the investigation will come as a relief to JPMorgan.
Although no company or individual was named in the CFTC investigation,
the Wall Street bank has suffered a torrent of allegations from silver
investors on the blogosphere.
One campaign exhorted sympathetic readers to “crash JPMorgan” by buying
silver – based on the assumption, which JPMorgan has repeatedly
denied, that the US bank has a large bet on lower silver prices.
In addition, a class-action lawsuit has been filed against JPMorgan.
Lawyers for the bank have asked a judge to dismiss it, arguing that
plaintiffs “fail to identify a single trade” showing manipulation.
Blythe Masters, head of commodities at JPMorgan, in an April interview
with CNBC conceded that there had been “a tremendous amount of
speculation, particularly in the blogosphere, about this topic”, but
maintained that the bank had no large bets on silver prices.
“We have no stake in whether prices rise or decline,” she said. JPMorgan declined to comment on the CFTC investigation.
Previous CFTC silver inquiries in 2004 and 2008 found no evidence of wrongdoing.
