Banks Shorting Silver: The JP Morgan Story

In March 2008, JP Morgan inherited a massive silver short position when it acquired Bear Stearns in a fire sale facilitated by the Federal Reserve. Bear Stearns had been shorting silver heavily, and those positions transferred to JP Morgan.

What happened next is remarkable: JP Morgan did not close those short positions. Instead, they expanded them. At various points, JP Morgan's silver short position represented 40% or more of the entire COMEX silver market.

Think about that. One bank, controlling nearly half of all short positions in the silver futures market. This is not a free market - it is a controlled market.

Here is what few people discuss: while maintaining massive short positions publicly, JP Morgan was quietly accumulating physical silver. The bank's vaults reportedly hold hundreds of millions of ounces of physical silver.

Short the paper market to suppress prices. Buy physical at suppressed prices. When manipulation ends, profit from both. This is the accumulation theory that many silver analysts believe explains bank behavior.

In 2020, JP Morgan entered into a deferred prosecution agreement with the Department of Justice. The bank admitted that its traders engaged in widespread spoofing and market manipulation.

The settlement included:

• A criminal monetary penalty of $436.4 million
• CFTC civil penalty of $436.4 million
• Victim compensation fund of $35 million
• SEC disgorgement of $12.3 million

"For nearly a decade, a significant number of JP Morgan traders and sales personnel openly, and in plain view of their supervisors, placed orders that they intended to cancel before execution." - DOJ Statement

The Convicted Traders

Michael Nowak, JP Morgan's head of precious metals trading, was convicted in 2022 of racketeering, conspiracy, and spoofing charges. He led the desk from 2009 to 2019.

Gregg Smith, a senior trader, was also convicted on similar charges. John Edmonds, another trader, pleaded guilty and cooperated with prosecutors.

The prosecution used the RICO Act - the same law used to prosecute organized crime. Federal prosecutors argued the trading desk operated as a criminal enterprise within the bank.

JP Morgan is not the only bank implicated in silver manipulation. The pattern of concentrated short positions and coordinated trading extends across multiple major financial institutions.

Deutsche Bank

In 2016, Deutsche Bank settled lawsuits alleging it conspired to manipulate silver prices. As part of the settlement, Deutsche Bank agreed to provide evidence against other banks involved in the scheme.

This evidence reportedly included chat logs, emails, and trading records showing coordination among major banks in the London silver fix.

HSBC

HSBC has faced multiple allegations related to precious metals manipulation. In 2018, the bank paid $765,000 in CFTC penalties related to spoofing in precious metals markets.

UBS

UBS was named in class action lawsuits alleging silver price manipulation. The bank was one of the participants in the London Silver Fix before it was disbanded.

Bank of Nova Scotia (Scotiabank)

Scotiabank paid $127.4 million in 2020 to settle CFTC charges that its traders manipulated precious metals futures markets through spoofing.

Understanding why banks maintain massive short positions helps you understand the silver market and how to position yourself.

Reason 1: Profit from Volatility

Banks profit from volatility. By spoofing prices down, they can buy at artificial lows. By manipulating prices up, they can sell at artificial highs. The bigger the moves, the bigger the profits.

Reason 2: Market Making

Banks claim short positions are necessary for "market making" - providing liquidity for customers who want to buy. But market making does not require concentrated positions that exceed annual mining supply.

Reason 3: The Accumulation Strategy

Many analysts believe banks short paper silver to suppress prices while simultaneously accumulating physical silver. Keep prices low through derivatives, buy the real metal cheap, profit when manipulation ends.

Reason 4: Monetary Policy Support

Some researchers suggest silver and gold suppression serves broader monetary policy objectives. Rising precious metals prices signal inflation and currency weakness - inconvenient truths for central banks.

"The gold price is the enemy of the dollar. Central banks have every incentive to keep it under control." - Jim Rickards

Here is where the silver story gets interesting. While banks maintain massive short positions in paper markets, evidence suggests they are simultaneously accumulating physical silver.

JP Morgan reportedly holds over 600 million ounces of physical silver in its vaults - one of the largest private silver hoards in history. Why would a bank that is short silver accumulate so much physical metal?

The Strategy Explained

1. Step 1: Use paper short positions to suppress silver prices
2. Step 2: Buy physical silver at artificially low prices
3. Step 3: When manipulation ends, prices rise
4. Step 4: Physical silver holdings multiply in value
5. Step 5: Close short positions (at a loss) but overall profit massively

This explains the apparent contradiction: banks short paper silver while buying physical. They know paper silver is not real - but physical silver is. They are positioning for the end of their own manipulation.

You cannot stop banks from manipulating markets. But you can position yourself to benefit when manipulation ends.

Strategy 1: Own Physical Silver

Physical silver cannot be spoofed, shorted, or manipulated away. When you own the metal, you own a real asset that benefits from price discovery. Paper silver can go to zero in a crisis - physical silver cannot.

Strategy 2: Use a Silver IRA

A properly structured Silver IRA holds physical silver in IRS-approved depositories with segregated storage. You get tax advantages AND real metal ownership. This is the same strategy banks use - accumulate physical at suppressed prices.

Strategy 3: Avoid Paper Silver Products

ETFs, futures, pool accounts, and unallocated silver are all paper products that banks can manipulate. When the paper market meets reality, paper holders may discover their "silver" does not exist.

Strategy 4: Think Long-Term

Bank manipulation has persisted for decades. It may continue longer than you expect. But fundamentals always win eventually. Physical silver is used in solar panels, electronics, and medicine - industrial demand grows while mines deplete.