by Vincent Lanci, Silver Doctors:
The New York 2nd U.S. Circuit Court of Appeals ruled yesterday that District Court Judge Engelmayer was in error when he dismissed the Silver price rigging lawsuits against JP Morgan. The appellate court felt that Engelmayer’s dismissal reasons amounted to “impermissible fact finding” and placed too high of a bar in concluding that plaintiffs had not adequately plead their case.
This reversal of the June, 2016 dismissal means the case will go back to the district court for further litigation. This also means the plaintiffs will ask for and receive more discovery. This can win the case for them.
The Lawsuit Was Dismissed in June,2016
JPMorgan Chase & Co had won the dismissal of three private antitrust lawsuits, including from hedge fund manager Daniel Shak, accusing the largest U.S. bank of rigging a market for silver futures contracts traded on COMEX.The lawsuits accused JPMorgan of having in late 2010 and early 2011 placed artificial bids onto the trading floor, harangued employees at metals market COMEX to obtain prices it wanted, and made misrepresentations to a committee that set settlement prices.
- Our report June 30, 2016 JPM Silver Decision Flawed
Why it Was Dismissed in June
U.S. District Judge Paul Engelmayer in Manhattan, however, said the plaintiffs, who also included traders Mark Grumet and Thomas Wacker, did not show that JPMorgan made “uneconomic” bids, or intended to rig the market at counterparties’ expense.
He also questioned the plaintiffs’ use of Silver Indicative Forward Mid Rates (“SIFO”) as a benchmark for determining proper levels for the spreads in their lawsuits.
In fact on April 21st, 2016 JP Morgan urged the judge quash the litigation. JPMorgan insisted allegations that the bank monopolized the market were too vague to support antitrust claims. They urged the judge ot raise the bar for the plaintiffs’ burden of proof.
The Appeals Court Overturns the Dismissal Yesterday
The appellate court held that the plaintiffs did in fact submitted evidence that did in fact reach a level warranting further investigation. Therefore, the case should not have been dismissed.
In quoting the law, the 3 judges stated:
A plaintiff need only allege enough facts ‘to raise a right to relief above the speculative level,’ and ‘state a claim to relief that is plausible on its face.’
They stated that Judge Enlgemayer’s requirements for such specifics were too high to reach, describing the proof bar being raised to “a level of detail not required to withstand a motion to dismiss”
In essence what Judge Engelmeyer asked of the plaintiffs was impossible to ascertain in those proceedings.
Specifically: “Fact-specific questions cannot be resolved on the pleadings.”
Can JP Morgan Monopolize Silver? Yes
The appellate court noted that the plaintiffs’ allegation of JP Morgan’s ability to control silver futures prices with reference to a particular market was proven correct. Thus,
“The District Court did not err in concluding that the Plaintiffs plausibly alleged a relevant market.”
This means that the plaintiffs showed plausibility that JP Morgan could control the far end of the Silver futures term structure via non-competitive bids.
To traders, that means the JPM client who had to sell back month was faded way too low. [EDIT- And when one looks at the term structure from then, it is obvious that no true physical demand was in evidence based on the spot contango.- Vince Lanci]
Did JP Morgan Monopolize Silver? To be Determined
The Appeals court did not say they believed JP Morgan exercised such ability to monopolize the Silver market. But the statement that they noted the power to do so was proven in the first hearing is significant in that it agrees with the District court’s findings.
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