The trial of the former head of precious metals at JP Morgan Chase, which has been in full swing since Friday, provides a sneak peek into the world of exchanges and the pay for its employees.
Michael Nowak, who for at least a decade was in charge of the precious metals division at the bank, is on trial with two colleagues, Gregg Smith and Jeffrey Ruffo, for complicity in manipulating the gold and silver market.
So far, the documents submitted as part of the trial show – for the first time in such detail – figures for the bank's annual profits from precious metals. This sector has been consistently lucrative for JP Morgan, with profits reaching between $109 million and $234 million annually from 2008 to 2018. The largest share comes from trading in financial markets, but the Bank records high profits and from its activity in physical transactions. Indicatively, transactions and transfers of precious metals in physical form bring the bank about 30 million dollars a year.
In fact, these profits soared due to the coronavirus: in particular, in 2020 JP Morgan recorded a profit of $1 billion from precious metals, as the pandemic created unprecedented opportunities for speculation.
The bank keeps millions of dollars worth of gold in vaults in London, New York and Singapore, and the trial revealed it has established a dominant position in the global precious metals market. For example in 2010, 40% of all transactions in the international gold market passed through the hands of JP Morgan.
Bonus
The bank's high-ranking employees in the specific area were highly paid, and some jurors even exclaimed when they heard the exact amounts.
Ruffo, who worked with a hedge fund, had earnings of $10.5 million from 2008 to 2016. Smith, head of gold trading, had $9.9 million. Their manager, Nowak, received a total of $23.7 million over the same period.
Their salaries were tied to the profits they made for the bank. Marc Troiano of the FBI said in court that the total amount Ruffo brought to the bank from 2008 to 2016 was $70.3 million, Smith about $117 million and Nowak $186 million.
Key customers
The division served large clients such as hedge funds and central banks. Those customers also enjoyed other perks, such as free tickets to the US Open, according to messages read during the trial. Also, according to relevant documents, in 2010 at least ten central banks kept their precious metals in vaults managed by JP Morgan.
moneyreview.gr with information from Bloomberg
[This article was translated from its Greek original]
