A federal decide has placed on maintain, for not less than six months, a civil lawsuit accusing J.P. Morgan Chase of rigging the dear metals market, citing an ongoing associated legal investigation.
Decide Paul Engelmayer’s determination got here on the request of federal prosecutors in Manhattan, however solely after he had repeatedly pushed them to justify the pause in civil proceedings.
Prosecutors had warned Engelmayer that their legal probe could possibly be harmed by a request final month by plaintiffs within the civil case to ask new questions of two ex-J. P. Morgan metals merchants and the financial institution’s world head of base and valuable metals buying and selling.
Particulars of that legal investigation of the nation’s largest financial institution should not recognized. In prosecutors’ court docket filings searching for the delay, the small print of the probe seem in areas which might be blacked out.
Prosecutors final week spoke to Engelmayer on a teleconference name that didn’t embody the events to the civil case.
After that decision, Engelmayer issued an order final Friday in U.S. District Courtroom in Manhattan, which mentioned, “For the explanations acknowledged by the Authorities, legislation enforcement pursuits presently counsel in favor of deferring any such reopened depositions.”
However Engelmayer additionally famous that “it’s doubtless that the Courtroom will ultimately allow a number of depositions to be reopened on this case, within the pursuits of justice.”
He informed prosecutors to replace him by Might 30 on the progress of the legal investigation, and to inform if they need an additional postponement of the civil case.
Neither the plaintiffs within the lawsuit nor J.P. Morgan opposed the postponement.
The legal case grew to become public early in November when a plea settlement made with John Edmonds, a 36-year previous former J.P. Morgan metals dealer, was unsealed within the U.S. District Courtroom in Connecticut. Edmonds pleaded responsible to conspiracy and commodities fraud.
Edmonds admitted throughout his responsible plea that he — and different “unnamed co-conspirators” on the financial institution — fraudulently manipulated the dear metals markets from 2009 to 2015.
The Brooklyn, New York, resident mentioned he had realized the unlawful buying and selling ways from senior merchants, after which used them lots of of instances with the data of and consent of his speedy supervisors.
When he introduced Edmonds’s responsible plea, U.S. Legal professional for Connecticut John Durham mentioned, “The investigation of misleading buying and selling practices by others concerned on this scheme is ongoing.”
The plea drew the eye of David Kovel, the lawyer representing the plaintiffs within the civil case towards the financial institution.
That lawsuit, filed in 2015 by hedge fund supervisor Daniel Shak and two commodity merchants, accused metals merchants at J.P. Morgan of conduct much like to acts described in in Edmonds’ plea deal.
The plaintiffs declare they misplaced tens of tens of millions of because of actions by J.P. Morgan’s merchants.
“The current admissions of Mr. Edmonds comply with repeated denials by JP Morgan that this kind of anticompetitive habits was, or may have been, occurring,” Kovel mentioned in a court docket submitting.
Kovel then requested Engelmayer to reopen the method often called discovery in order that he may re-question Edmonds, together with Robert Gottlieb, a former managing director at JP Morgan whom Edmonds has described as his mentor.
Kovel additionally wished to re-depose Michael Nowak, who’s J.P. Morgan’s world head of metals buying and selling. Nowak additionally had been Edmonds’s speedy supervisor.
Prosecutors, of their response to Kovel’s request informed Engelmayer that they didn’t need the merchants re-deposed for now, and wished a brief halt to the complete civil case, as a result of the lawsuit was “associated” to Edmonds’ legal case.
“Edmonds awaits sentencing, however the broader investigation is ongoing,” the Justice Division mentioned in a court docket submitting. A delay within the civil case was mandatory “to guard the integrity” that probe, the division mentioned.
J.P. Morgan, which declined to remark when contacted by CNBC, informed Engelmayer that Edmonds’ responsible plea was not pertinent to the civil case.
The financial institution additionally argued that it was “extremely unlikely” that re-deposing the three males would “result in related proof.”
When requested in regards to the decide’s determination to pause the civil case, Kovel informed CNBC that, “we have been heartened by the decide’s determination as a result of it seems to substantiate our perception that there’s a shut relationship between the circumstances.”
“We’re very within the legal case and the way it performs out and the way it will have an effect on the prosecution of our circumstances,” Kovel mentioned.
The Justice Division and Gottlieb had no speedy remark when contacted by CNBC.