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Judge Consolidated JPMorgan Spoofing Suits, Taps Counsel

10/09/2020 | Law360
A New York federal judge on Friday consolidated seven proposed class actions alleging JPMorgan Chase has been illegally spoofing the futures market since 2009 and appointed Lowey Dannenberg PC and Kirby McInerney LLP as interim lead co-counsel.

The two firms were vying with Nussbaum Law Group PC and Kessler Topaz Meltzer & Check LLP to lead the suit that combined the several actions filed after JPMorgan acknowledged it was being investigated for trading practices.

When JPMorgan filed its annual Form 10-K for 2019 with the U.S. Securities and Exchange Commission on Feb. 25, it admitted that "various authorities, including the [U.S. Department of Justice's] Criminal Division, were conducting investigations relating to trading practices in the metals markets and related conduct."

Spoofing is an illegal action undertaken by traders who place deceptive orders to buy and sell futures contracts, cancel the orders before they're completed and simultaneously enter orders on the opposite side, creating the false appearance of demand.

The complaints allege JPMorgan senior traders and supervisors encouraged the manipulative trading strategy.

"The court finds that any prejudice is far outweighed by the benefits in terms of judicial economy that would result from consolidating the actions," U.S. District Judge Paul A. Engelmayer said.

The judge noted that on May 1, Lowey Dannenberg and Kirby McInerney filed the first spoofing class action in the Northern District of Illinois.

"Between Lowey and Kirby, the two firms have secured the two largest recoveries ever in [Commodities Exchange Act] cases," he said.

He cited Lowey's record of securing class certification and settlements in Commodities Exchange Act cases, specifically spoofing cases, including one in which the firm is serving as lead counsel against JPMorgan in the same district, New York's Southern District.

Kirby represented individual traders in a silver-futures manipulation case against JPMorgan also in the Southern District.

"Together, the firms have a proven track record in similar cases," Judge Engelmayer said.

The judge also designated law firms Nussbaum Law Group, P.C., Cafferty Clobes Meriwether & Sprengel LLP, Scott + Scott Attorneys at Law LLP and Freed Kanner London & Millen LLC as support to the interim lead co-counsel should they need it.

The consolidation comes as JPMorgan is facing numerous suits and criminal prosecution, with cases being removed to other districts.

Lawsuits started being filed shortly after former JPMorgan metals trader John Edmonds pled guilty to a six-year spoofing scheme in November 2018.

In August 2019, another former trader, Christian Trunz, also pled guilty.

Another four former and current JPMorgan traders, including the head of JPMorgan's global precious metals desk, have been criminally charged since, and the U.S. Commodity Futures Trading Commission has leveled civil penalties and sanctions against several of the traders.

In 2015, after being charged with market rigging, JPMorgan paid a $550 million criminal fine as part of an antitrust plea agreement.

In 2013, the bank paid a $285 million civil penalty and disgorged $125 million in profits from "manipulative bidding strategies" to settle claims from the Federal Energy Regulatory Commission that the bank manipulated power markets in California and the Midwest.

"We are pleased with the court's decision to appoint our firm and Lowey Dannenberg as interim co-lead counsel," Karen M. Lerner of Kirby McInerney LLP told Law360 Friday in a statement. "We look forward to prosecuting this action on behalf of traders who suffered losses as a result of JPMorgan's manipulation in the Treasuries futures market."

Counsel for JPMorgan didn't immediately respond to a request for comment Friday.

Plaintiffs are represented by Raymond P. Girnys, Vincent Briganti and Margaret MacLean of Lowey Dannenberg P.C., and Karen M. Lerner, David E. Kovel and Anthony E. Maneiro of Kirby McInerney LLP.

JPMorgan is represented by Amanda Flug Davidoff, Akash Mayank Toprani and Robert Andrew Sacks of Sullivan & Cromwell LLP.

The consolidated case is In re JPMorgan Treasury Futures Spoofing Litigation, case number 20-cv-3515, in U.S. District Court for the Southern District of New York.