Details of the Sentencing
Two ex-traders at JPMorgan Chase, Gregg Smith, and Michael Nowak, were sentenced on Tuesday for their roles in a fraudulent scheme. Smith, 59, from Scarsdale, New York, received a two-year prison sentence and a $50,000 fine, while Nowak, 49, from Montclair, New Jersey, was handed one year and one day in prison and a $35,000 fine.
The Market Manipulation Scheme
Over eight years between 2008 and 2016, Smith and Nowak were involved in a market manipulation scheme that caused over $10 million in losses to market participants. The scam involved tens of thousands of unlawful trading sequences, according to the U.S. Justice Department.
Spoofing is a practice where traders place and then quickly cancel orders, creating a false impression of high demand or supply. This method was declared illegal in 2010 with the enactment of the Dodd-Frank Act after the financial crisis.
Trial and Convictions
In the trial last year, Smith was found guilty of 11 charges, and Nowak was convicted on over a dozen charges, including fraud, spoofing, and attempted market manipulation. However, both were acquitted of racketeering and conspiracy.
JPMorgan's Settlement with Regulators
In response to the fraudulent actions of these and other traders, JPMorgan Chase agreed in 2020 to pay over $920 million, admitting wrongdoing in a settlement with the Justice Department and the Commodity Futures Trading Commission.