Former JPMorgan traders Michael Nowak and Gregg Smith have submitted a motion to stay the action brought against them by the Commodity Futures Trading Commission (CFTC). The motion, filed on November 22, 2023, at the Illinois Northern District Court, asserts that the case should be put on hold until the resolution of the appeal. Moreover, any subsequent retrial in the parallel criminal action they are facing.

To recap, the CFTC initiated a civil enforcement action in September 2019 in the U.S. District Court for the Northern District of Illinois, accusing Nowak and Smith of spoofing, engaging in manipulative and deceptive schemes. They were attempting to manipulate prices in the precious metals futures markets while employed at JPMorgan.

Ex-JPMorgan Traders Nowak and Smith Seek Stay in CFTC Case

The CFTC’s complaint alleges that from at least 2008 through 2015, the traders engaged in manipulative acts by spoofing, placing, and canceling orders to create false signals of increased buying or selling interest. It further claims that the defendants intended to manipulate market prices. It facilitates the execution of their orders on more favorable terms.

The traders, aware of alleged spoofing practices at the bank, are accused of teaching other JPMorgan traders how to engage in similar activities. In August 2022, after a lengthy trial, both Nowak and Smith were convicted of some counts related to these allegations. Subsequently, in August 2023, they received prison sentences of 24 months and a year and a day, respectively. They are currently in the process of appealing their convictions.

The CFTC action has been on hold since June 2020 following a motion by the U.S. Department of Justice (DOJ). The traders had agreed to the stay to protect their Fifth Amendment rights but sought substantial discovery during this period. Now, the traders argue that the CFTC, despite initially being content with a multiyear stay, is suddenly pressing for expedited proceedings, seeking depositions of the defendants in prison and early summary judgment.

Nowak and Smith contend that such tactics are unjust. The CFTC aims to obtain judgments before the appeal process is over, potentially forcing the defendants into adverse inferences. The traders emphasize that the interests of justice and considerations of judicial resources support extending the stay until the resolution of the appeal and any subsequent retrial in the criminal action. The Seventh Circuit has consolidated its appeals, with appellate briefs due on January 5, 2024.

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