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BookmarkNEW YORK (MarketWatch) — Two separate lawsuits filed in federal court in Manhattan Wednesday allege that banks J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 37.38, -0.25, -0.66%) and HSBC Holdings Inc. /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 52.26, +0.15, +0.29%) manipulate the price of silver futures by “amassing enormous short positions.”
The suits allege that by managing giant positions in silver futures and options, the banks have influenced the prices of silver on the New York Stock Exchanges’ Comex Exchange since early 2008.
The Commodity Futures Trading Commission has been in the midst of a high-profile, two-year-old investigation of the silver market.
J.P. Morgan declined to comment on the lawsuits. HSBC wasn’t immediately available to comment.
A suit filed by Peter Laskaris, who traded COMEX silver futures and options contracts, says the banks colluded on the silver market and informed each other of large trades. It says the banks used their large positions to effect the market by “flooding” it with a disproportionate number of orders.
The suit says J.P. Morgan and HSBC in August 2008 together held 85% of the net short position in silver and by the first quarter 2009 held $7.9 billion in precious metal derivatives.
According to the other lawsuit filed by Brian Beatty, who also traded silver contracts, says he was hurt by J.P. Morgan’s alleged anticompetitive acts and market manipulation. Specifically, the suit said Beatty, a Connecticut resident, bought and sold silver contracts on Aug. 14 and Aug. 15, 2008, when the price of silver suffered an 18% drop from $14.86 to $12.23.
Laskaris, a New York resident, also was hurt by the alleged “artificial market in COMEX silver futures” from June 2008 to June 2009, according to the lawsuit.
The suit by Laskaris further alleges that when the public began complaining about the banks’ high positions and the government began an investigation in March silver prices, silver went from underperforming to outperforming the price of gold.
The silver market, no stranger to controversy, has long been the focus of manipulation theorists. At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made “repeated” and “fraudulent efforts to persuade and deviously control” silver prices.
J.P. Morgan and HSBC traditionally have been big players in the silver market. A CFTC weekly report for Oct. 19, the most recent period, shows that less than four market players hold 24.3% of all net bearish bets in the silver market. J.P. Morgan and HSBC are among those market participants, The Wall Street Journal reported, citing silver traders and a person close to the investigation.
In recent months, however, the banks with large futures positions have sharply reduced the size of their holdings.
The lawsuits request the banks’ “unjust” enrichments from the collusion and manipulation.
(Updates with more information from suits, HSBC declines to comment, comments from a strategist.)
NEW YORK (MarketWatch) — Two separate lawsuits filed in federal court in Manhattan Wednesday allege that banks J.P. Morgan Chase & Co. JPM and HSBC Holdings Inc. HBC manipulate the price of silver futures by “amassing enormous short positions.”
The suits allege that by managing giant positions in silver futures and options, the banks have unfairly influenced the prices of silver on the New York Stock Exchanges’ Comex Exchange since early 2008.
J.P. Morgan and HSBC both declined to comment on the lawsuits.
A suit filed by Peter Laskaris, a New York trader of COMEX silver futures and options contracts, says the banks colluded on the silver market and informed each other of large trades. It says the banks used their large positions to effect the market by “flooding” it with a disproportionate number of orders and “reaped hundreds of millions of dollars, if not billions of dollars in profits from their unlawful and manipulative suppression of the prices.”
The suit says J.P. Morgan and HSBC in August 2008 together held 85% of the net short position in silver and by the first quarter 2009 held $7.9 billion in precious metal derivatives.
The other lawsuit filed by Brian Beatty, who also traded silver contracts, says he was hurt by J.P. Morgan’s alleged anticompetitive acts and market manipulation. Specifically, the suit said Beatty, a Connecticut resident, bought and sold silver contracts on Aug. 14 and Aug. 15, 2008, when the price of silver suffered an 18% drop from $14.86 to $12.23.
The suit by Laskaris further alleges that when the public began complaining about the banks’ high positions and the government began an investigation in March, silver prices went from underperforming to outperforming the price of gold.
The silver market, no stranger to controversy, has long been the focus of manipulation theorists. At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made “repeated” and “fraudulent efforts to persuade and deviously control” silver prices.
J.P. Morgan and HSBC traditionally have been big players in the silver market. A CFTC weekly report for Oct. 19, the most recent period, shows that less than four market players hold 24.3% of all net bearish bets in the silver market. J.P. Morgan and HSBC are among those market participants, The Wall Street Journal reported, citing silver traders and a person close to the investigation.
In recent months, however, the banks with large futures positions have sharply reduced the size of their holdings.
Michael Purves, chief equity strategist and head of derivatives research at BGC Financial, said talks of silver manipulation are nothing new. But lawsuits are pretty uncommon.
“What you’re seeing is a developing pattern,” Purves said. “Chilton on the top, traders from the trenches, this is part of an interesting string of developments. If the allegations are true, this is a big deal and it becomes a giant PR issue that the central bank will eventually have to deal with.”
The lawsuits request the banks’ “unjust” enrichments from the collusion and manipulation and are seeking class-action status.
