How an Institutional Whale Spoofed Metals For Years and What it Means For Crypto
A former J.P. Morgan trader admitted to spoofing metals markets for nearly seven years to profit from futures contracts. This helps confirm speculative theories on spoofing.
You can see the press release from the Department of Justice here: Former Precious Metals Trader Pleads Guilty to Commodities Fraud and Spoofing Conspiracy.
Opinions on Why This Matters in the Context of Crypto
To better frame why this is a big deal in the crypto space, in Gold and Bitcoin markets traders often complain that markets appear to be manipulated, specifically “spoofed” by “whales,” in order for them to profit from futures contracts and leveraged contracts. Sometimes people event claim this is “the cartel” (AKA the banks and their institutions) and not “Joe the crypto whale” doing this.
Up until now it has been a little tin-foil-hat-ish to claim all this. However, this guilty plea essentially proves that “whales who manipulate the market by spoofing to profit from futures” are real… and it even gives some merit to the cartel theory (not to the extent the theory goes, but it does hint that it isn’t entirely off).
Further, much to the vindication of the crypto space, it also proves that manipulation doesn’t just occur in the crypto space (crypto is often treated like all the bad things in the world only happen there).
After all, this wasn’t some shady rich criminal who got some Bitcoin on the dark web back in 2010 being a threat to our upstanding institutions by manipulating Bitcoin, it was some college educated Ivy League suit working at our upstanding institutions who was pressing the buttons / running the scripts (while his superiors watched).
Look, no judgement on suit guy or his employer, the DOJ did their thing, and honestly I’m neutral here. But like, let’s not pretend that crypto is so unique, or its users/traders so out of the norm, when taking a magnifying glass to things like Bitcoin ETFs.
This event shows that while manipulation is clearly a problem, it isn’t a problem we can pin on crypto and call it a day.
Manipulation is a problem that clearly affects at least the metals markets too. We need metals, we need metals futures, we need metals markets. Our economy cannot function without metals. So we have to figure out how things still work without spoofy-the-metals-whale (John Edmonds, 36, of Brooklyn, New York), we can’t just throw out metals and metals derivatives because of him and his accomplices.
We might not “need” crypto, but it is a valid asset and it shouldn’t be looked down on for something that is common in another market.
We might not all approve of spoofy-the-bitoin-whale, and maybe the DOJ will knock on that door soon enough, again… don’t care, I’m neutral, but even if that happens, we shouldn’t take it as a sign of Bitcoin’s validity.
In simple terms, 1. there is apparently very little you can do with a Bitcoin that hasn’t already been done with Gold, 2. kind of makes you think about that pump over futures and the dump afterwords and the cartel theory… just sayin’, 3. Jamie Dimon, *cough*… little hypocritical dude, and, 4. we can’t confuse a few bad apples who manipulate markets with an asset class or the valid buyers/sellers in that market… It isn’t fair to treat Bitcoin and crypto like it is so bad when so many of its negative qualities are shared with other valid asset classes (forex, metals, tech, etc).