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Willem Middelkoop
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Willem Middelkoop (1962) author of The Big Reset, published in three languages English, Chinese and Dutch. He is founder of the Commodity Discovery Fund. In the Netherlands he is best known for his work as a business commentator for the RTL Z business channel between 2001 and 2008. He also... More
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The Big Reset
  • THE CFTC SILVER COVER UP 0 comments
    Oct 4, 2013 11:33 AM | about stocks: SLV

    The CFTC Silver Cover Up

    The Commodity Futures Trading Commission (CFTC) has concluded its investigation into complaints of misconduct regarding the silver prices. The investigation, initiated in 2008, was focused on determining whether silver futures traded on the Comex were being manipulated. In a press release dated September 25th, the CFTC concludes there is no ground for manipulation:

    "there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets"

    This conclusion is remarkable, since CFTC Commissioner Bart Chilton confirmed at a 2010 CFTC meeting that there have been "fraudulent efforts to persuade and deviously control that (silver)price." Clearly, the CFTC conclusion does not align with the ideas of one of its main commissioners.

    I fully understand his frustration, because during the research for my new book, The Big Reset, which will be published in early 2014, I found strong and compelling evidence relating to the manipulation of precious metal markets.

    During the course of the investigation, clear evidence of anomalies in trading in silver markets was provided. In a CFTC-hearing at the end of 2009, the London-based silver trader Andrew Maguire came forward to recount how he had witnessed planned attacks on the price of silver. Maguire informed the commission he had overheard how JPMorgan traders used to boast how much money they made by manipulating gold and silver markets.

    Maguire informed the CFTC in an email directed at CFTC commissioners Chilton and Ramirez. In it, he explained how JPMorgan worked the markets especially around days with option expiries, as well as on days when important economic news was announced:

    From: Andrew Maguire
    Sent: Tuesday, January 26, 2010 12:51 PM
    To: Ramirez, Eliud [CFTC]
    Cc: Chilton, Bart [CFTC]
    Subject: Silver today

    Dear Mr. Ramirez:

    I thought you might be interested in looking into the silver trading today. It was a good example of how a single seller, when they hold such a concentrated position in the very small silver market, can instigate a selloff at will. These events trade to a regular pattern and we see orchestrated selling occur 100% of the time at options expiry, contract rollover, non-farm payrolls (no matter if the news is bullish or bearish), and in a lesser way at the daily silver fix.

    The CFTC commissioner Ramirez confirmed having received Maguire's input in a reply the following day:

    From: Ramirez, Eliud [CFTC]
    To: Andrew Maguire
    Sent: Wednesday, January 27, 2010 4:04 PM
    Subject: RE: Silver today

    Mr. Maguire,

    Thank you for this communication, and for taking the time to furnish the slides.

    In January 2010, Maguire warned the CFTC about an upcoming attack on the silver price. In an email directed at CFTC commissioners Chilton and Ramirez, he described in detail how gold and silver would be hit at the moment the non-farm payrolls number would be made public:

    From: Andrew Maguire
    To: Ramirez, Eliud [CFTC]
    Cc: BChilton [CFTC]
    Sent: Wednesday, February 03, 2010 3:18 PM

    Thought it may be helpful to your investigation if I gave you the heads up for a manipulative event signaled for Friday, 5th Feb. The non-farm payrolls number will be announced at 8.30 ET. There will be one of two scenarios occurring, and both will result in silver (and gold) being taken down with a wave of short selling designed to take out obvious support levels and trip stops below. While I will no doubt be able to profit from this upcoming trade, it is an example of just how easy it is to manipulate a market if a concentrated position is allowed by a very small group of traders.

    I am aware that physical buyers in large size are awaiting this event to scoop up as much 'discounted' gold and silver as possible. These are sophisticated entities, mainly foreign, who know how to play the short sellers and turn this paper gold into real delivered physical.

    The hit occurred exactly as Maguire had predicted. Maguire sent another email after the attack occurred:

    From: Andrew Maguire
    To: Ramirez, Eliud [CFTC]
    Cc: BChilton [CFTC]; GGensler [CFTC]
    Sent: Friday, February 05, 2010 3:37 PM
    Subject: Fw: Silver today

    A final e-mail to confirm that the silver manipulation was a great success and played out EXACTLY to plan as predicted yesterday. How would this be possible if the silver market was not in the full control of the parties we discussed in our phone interview? I have honored my commitment not to publicize our discussions. I hope you took note of how and who added the short sales (I certainly have a copy) and I am certain you will find it is the same concentrated shorts who have been in full control since JPM took over the Bear Stearns position.

    Silver newsletter writer Ted Butler will also be frustrated since he has asked the CFTC for over 27 years about the manipulation in silver markets. According to Butler, the CFTC "has conducted three formal reviews into whether silver was manipulated in the last nine years alone". In the first two, the agency concluded no manipulation had taken place. Until 2008, the CFTC denied on several occasions the occurrence of any form of manipulation in silver.

    Continuous complaints and several petitions by silver investors worldwide resulted in the third silver investigation. In September 2008, the CFTC confirmed that its Division of Enforcement has been investigating "complaints of misconduct in the silver market." During all these years, including during the latest investigation, Ted Butler, who was directly involved in initiating all three reviews, has never heard anything from the CFTC and was never interviewed.

    CFTC commissioner Bart Chilton himself has made public commentsabout the persistent large concentration of contracts on the short side of the COMEX silver positions. These comments resulted in a civil class action lawsuit being filed in 2011 against JPMorgan, who has been holding a majority of these positions for years.

    The lawsuit discusses JP Morgan's acquisition of Bear Sterns' massive short silver position after its collapse in 2007. It also details how JP Morgan earned $150 million dollars with each dollar decline in the price of silver. According to Butler, Mr. Chilton began to "distance himself from his previous comments about concentration in COMEX silver and just as quickly, the lawsuit floundered". A New York judge dismissed the CFTC lawsuit at the end of December 2012 due to lack of evidence.

    In November 2011 the CFTC issued a status report on its investigation into silver manipulation:

    "In September of 2008, the Commission announced the existence of an enforcement investigation into the possibility of unlawful acts in silver markets. Since that time, the staff has analyzed over 100,000 documents and interviewed dozens of witnesses and obtained expert advice. It has been a long, detailed, and thorough investigation, and it continues in an appropriate and considered manner."

    In September 2012 the precious metals blog silverdoctors.comcontacted Bart Chilton by e-mail. He replied:

    "I continue to believe, consistent with my previous statements to which you referred, and based upon information from the public, that there have been devious efforts related to moving the price of silver. Incidentally, I also believe there have been silver and gold market anomalies outside of the silver investigate window that have raised, and continue to raise, market concerns."

    A few weeks ago whistleblower Andrew Maguire told KingWorldNews that two JP Morgan employees had come forward with hard evidence that the bank was actively manipulating the gold and silver markets. According to Maguire, the CFTC buried this information and the JP Morgan whistleblowers did not receive any meaningful response to their evidence from the CFTC according to Maguire.

    According to Maguire, Commissioner Chilton assured him, "I can't appropriately express my frustration and disappointment with how we've handled the silver investigation... And, as you know, I'm prohibited from actually saying much. That said, I will not let September go by without speaking out if the agency doesn't do so."

    He showed his frustration after the CFTC decision by stating: "there's not been a more frustrating nor disappointing non-policy-related matter at the CFTC."

    Despite the obvious inexplicable market movements, the evidence provided by whistleblowers, and the conviction of one of the agency's own policy makers, the CFTC has come to a highly contentious conclusion. One that reeks of a cover-up. A conclusion that can only be explained if one is to believe the CFTC has interests exceeding its official mandate. If market manipulation by the largest of bullion banks had been proven a fact in the investigation, this would have had profound consequences for the integrity of banks. The CFTC may have had no choice but to pronounce a clean market, as any other conclusion would have instigated a snowballing deterioration of banks' reputation, and subsequently of the whole financial system. A development that does not help anyone in the current financial crisis.

    The CFTC, then, like any official financial institution, has a prime directive to avoid panic in the markets. Its conclusion, however remarkable and unsatisfactory, should probably be seen from this perspective.

    It has not been completely without consequence, however.

    As mentioned in my previous blog, the CFTC now intends to end the physical storage of metals by banks, in order to avoid conflicts of interest that could lead to exactly such consequences as the manipulation of markets. Without physical storage, the banks no longer have access to the assets underlying the futures contracts on the Comex, implying they lose the primary tool that helps steer the metal markets. This is the indirect punishment that both the CFTC and the Fed have given to the open manipulation by banks, and is a fitting and subtle solution to a complicated issue.

    Stocks: SLV
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