JPM Reddit Mentions | ChartExchange

**TL;DR:**
* **This is one in a 3-part series investigating the background behind the GME-SLV swap.**
* **After revisiting what "Exchange for Physical" means in the context of failing naked trades, we briefly revisit famous rogue trader Jerome Kerviel (who naked shorted the futures marked while his French bank was conducting fraud with MBSes, trying nearly 1000 times to hide his trades). We discover that his naked trade sank the stock market in early 2008, and his standalone naked trade nearly sunk Societe Generale but also led to an emergency cut in the fed funds rate in the US while lending was constricted.**
* **Looking back at UBS' Adoboli, we find that UBS was one of the banks conducting widespread naked shorting (as seen in Chris DiIorio's FBI tips on recent posts) and UBS nearly collapsed over his naked bet. However, while banks like SocGen and UBS survived, Barings did not with their rogue trader that made a naked bet as well. ING absorbed Barings' liabilities as when banks sometimes do when they absorb other failing banks.**
* **Since the start of the financial crisis in 2008, JPMorgan (alongside HSBC) had been engaged in massive spoofing of precious metals fraud to drive prices down for metals, including silver. Why might JP Morgan have been doing this? Because in 2008, after buying a collapsed Bear Stearns, Jamie Dimon's JP Morgan Chase ALSO inherited what amounted to a massive and dangerous short position in silvers futures that now JP Morgan had on their books. JPM is the main custodian for SLV.**
*“Every great magic trick consists of three acts. The first act is called ‘The Pledge’. The magician shows you something ordinary. But of course, it probably isn’t…”*
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Hi everyone. I haven’t been here for a while because I stupidly locked myself out of my main account, but I’ve been here, lurking on another throwaway, and haven’t quite posted anything of note in some time (not that I usually do).
Since I’ve been (addicted) here to Superstonk, I found myself going from knowing absolutely fuck all about finance to eventually racking my brain over corridor variance swaps, CMBX towers, credit default swaps on entire countries, and more.
Hoping this is, if not an ok post, one that gets me back to adding more threads for all you great apes to pick at. But here’s hoping to it being one of my better DDs.
**TABLE OF CONTENTS**
**0. Preface**
1. **Let’s Jump Right In, Shall We?...Spoof, There It Is…**
2. **Rick Astley’s Merchandise Table**
3. **Charge Me Bruh**
4. **EFP**
5. **Jerome Kerviel & Kweku Adoboli**
6. **Adoboli: Rogue One**
7. **Mace Windu**
8. **Things Fall Apart**
9. **Meet Nick Leeson…and a Bank that Did Fail**
10. **Let’s Circle Back**
11. **Spoofing, Revisited**
12. **So Why Was JP Morgan Short?**
13. **Preface**
*“Every great magic trick consists of three acts. The first act is called ‘The Pledge’. The magician shows you something ordinary. But of course, it probably isn’t…”*
My Cocaine aka Michael Caine’s character in “The Prestige” beckons to you in its lilting lull, as you sit in your full body Bananya Cat onesie watching this scene at one point in one of Christopher Nolan’s arguably best movies.
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Maybe like what Michael Caine said, for many of us in GME, what used to seem like utter insanity (really a magic, but a dark one) at the completely fraudulent financial system has now become…normal…
…We understand that the SEC would rather watch terabytes of porn stars banging their clothes then enforce any NSCC rule about banging the close…
…we understand that back offices can change paperwork, term structures and all, at their leisure, or look the other way as every fuck face in a Patagonia jacket violates their position limits…
…and we know that there are massive assholes at the heart of this at every stage, with planet-level relentless algorithms that can leave every single man woman and child sitting on the curb with nothing more than a whisper in their hand as they use our own money and sometimes retirement accounts against us…
Again. Old hat. Something…unfortunately ordinary.
**This is what will be a three-part series will focus on a specific stock (SLV) related to GME and what it means for us back during the sneeze, before that, and even now. Even though it seems like I’m talking about another stock more than you’d like, my take will–and should–make sense by the end of this all. And if my take is right, then…well…**
But let’s get up to speed again, for reasons.
# 1. Let’s Jump Right In, Shall We?...Spoof, There It Is…
From going where I want to go, it makes sense to push forward to where I need to be, so let’s start with these four things: spoofing, short squeezes, and naked trading.
All of these things are things that we have seen with GME and I wanted to refresh…for reasons…
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Spoofing, if y’all remember, is when you make artificial demand with fake orders. Think of it whenever you hear about someone like Jeff Yass trying to say all the girls definitely dig him and he totally has a gf but she lives in Canada (eh?) (**artificial interest, pushing his “stock price” up in the view of others).**..
Just how any memes about the best way to drop housing prices in your neighborhood might getting your clay pigeon range practice on your very own sidewalk, and see how quickly people hearing your innocent pop pop pop finally makes you able to afford that duplex for about tree-fiddy, thus instantly making an artificial hate or distaste for something that’s fundamentally the same and has not changed **(driving the interest, driving the “stock price” down in the view of others’ eyes to want to live there).**
Appearances matter, and we’ve seen how this pulls up all the time with every sell and buy wall for GME and how spoofing can be weaponized against retail.
# 2. Rick Astley’s Merchandise Table
#
As far as short squeezes, we’re familiar with the basic mechanism right?
You want something that everyone wants, usually something in short supply, where then you’re in a good position. The example I always think of now is Rick Astley. Let’s say you work his merchandise table for his concerts.
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Now, I like Rick Astley. I know he’s never gonna give me up. But if I worked his merchandise table, I mean maybe I wouldn’t expect too much from both my love for him and expecting every fan to not want to buy his shit except ironically.
Let’s say you run a simple merchandise table. It sells two big items. Shirts that commemorate each concert with the date with the signed names of who’s performing, and…why not call them Morbidly Bedazzled Stanleycups. This was YOUR idea. Your big idea. And guess what, it’s done pretty well for itself.
Now you know you might get some boosts for selling shirts with every new meme post on TikTok or Jimmy Kimmel appearance by the red-headed god, **but you feel your real money is in those MBSes. Your last great idea was fidget spinners and those DEFINITELY were the shit…for a little while…but MBSes are different!**
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At first, you actually did pretty well with those Stanleycups…they were hot shit, everyone wanted them and you were hot to trot. No one really cared about Rick Astley much more than normal so you sold more of those. For now.
# 3. Charge Me Bruh
Every time a friend asked you if they could buy one of his concert shirts while you worked your table, you said well he’s still fucking Rick Astley. $100…and they had to pay if they wanted it. You put down an order and said I’ll get back to y’all with that shirt. But you ran the table often enough so could grab a shirt back to them when you wanted at your leisure.
A couple friends call in favors to get one of those shirts each, but you’re like nah I’m good on actually buying them or setting them aside. Y**ou think…why not wait till his popularity (or any recent boost in popularity) dies down and get the shirts again for cheap or resold ones off Ebay or the discount rack at Ross or TK Maxx.**
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All the shirts do sell out at some point but you argue it’ll drop down to $5 in a few weeks and just pocket the difference. Your table is empty of everything except your remaining shitty MBSes no one likes as much.
But remember, you’re working the table for Rick Astley. The motherfucking Rick fucking Astley, and you can never predict that damn legend just like you can’t predict his fucking age by looking at him.
One concert, he decides to go up to the mic and tell everyone Surprise! It’s his last concert…ever.
The crowd’s shocked. You’re more shocked because you knew that means when you gotta get those shirts, they might cost more. Because the price just went up on those last ones.
And then he goes up to the mic and says How about another surprise? And out comes Billy Joel saying it’s his last show there too. Then he’s joined by Ringo Starr playing backing drums to Rage Against the Machine. Then Yo-Yo ma says he’s dropping a last backing set to “Not Like Us” right as Kendrick comes on as says he’s retiring too…and then Bad Bunny appears with a wild Sydney Transharmonic Orchestra...and it keeps going…
By the time you have got to cat that can play like Stevie Ray Vaughan with his whiskers and the hamster breakdancing crew you just realized how quickly you got fucked for what amounted to be a fucking once-in-a-lifetime show. **The price on those concert shirts? Those just jumped the fuck up.**
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And if you needed to buy back those shirts, those are gonna be fucking expensive. And you might not be able to sell enough of your now not-as-popular MBSes to make up the difference.
# 4. EFP
What the tail end of that story reminds us about a few things, including what it means for you, running the merchandise table to make that call.
You see, you effectively ran a naked, or unhedged bet, that you’d be able to get those shirts back.
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Y**ou were running sometimes what’s called the following: EFP (exchange for product). Meaning that you don’t want it cash-settled or meaning you don’t want the cash value. If that Rick Astley shirt fucking shoots up to $100,000 because it’s all those fuckers (and that hamster crew’s) last show, they don’t want the money. THEY WANT THE SHIRT.** Your friend want to be able to be there at your next pub crawl or work happy hour and point to their coworker and tell Benjamin that they were fucking at that show and Benjamin wasn’t even if it’s not true.
This has a very specific meaning, and it starts to take us back into a few rabbit holes.
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# 5. Jerome Kerviel & Kweku Adoboli
During the 2008 mortgage crisis, one of the names I encountered in my research that went underreported was Jerome Kerviel. **I called it “The Richest Lie about the World’s Poorest Man”, where I mentioned how Kerviel was often famously reported as the world’s poorest man due to being billions of dollars of debt.**
Yet it wasn’t random. He didn’t take down the debt himself.
**It was referring to the fact that he nearly took down the French bank Societe Generale because of making naked short positions (much like your merch table) during the 2008 mortgage crisis, nearly losing $72 Billion in stock index futures.** This was one of those stories that was missed or not often connected, the same way we missed the VW squeeze in 08:
>“In 08’, SocGen “...refused to acknowledge or adequately account for the extent of losses on its positions. When analysts questioned the Company about its exposure to the decline in the prices of RMBSs and CDOs, Defendants falsely downplayed the Company's exposure and understated the significance of the losses…\[In\] November 2007: Carlos Beneto and Arno Dernies of SocGen (heads of CDO/MBS arms) knew ADDITIONAL potentially billions worth of writedowns on hedged and unhedged/“naked” trades were needed for MBSs.”
>
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Nearly 1.5 billion Euros worth of writedowns was fast approaching for their 25-man desk squad, where Kerviel had started this naked fraud since 2005. **He sometimes made trades that earned 25% of the department’s entire earnings, tried 947 (!) times to cover his naked trades, all while SocGen knew his trades meant over 2 billion in losses. The total amount he eventually bet? OVER TWICE THE BANK’S ENTIRE CAPITAL.**
It did come crashing down, BUT not entirely. SocGen lost nearly $50 billion unwinding the naked trades (which are even a Harvard Business School case study). A single trader spent THREE days unravelling his mess.
I only learned recently that Kerviel’s 2008 crash in January led to not only a steep 6% euromarkets fall causing nearly 550 BILLION euro in losses, **but an emergency cut in the fed funds rate by the Fed the next Tuesday (Jan 30). Because of Kerviel, that made it the SECOND fed funds rate cut in EIGHT days (after Jan 22) right as mortgages were shitting bricks and Burry, Baum & Co. were watching it all fall in early 2008.**
The fed funds rate is used to help lend money. By this point, the housing market and the stock market were starting to fall, and lending was getting cut off or constricted. Some argued that the funds rate cuts (not only due to Kerviel but related) help exacerbate the coming recession.
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Naked bets defined Kerviel, as they did others.
# 6. Adoboli: Rogue One
I spent much time (in fact well over 10 posts) documenting the case of Kweku Adoboli: the UBS trader who in 2011 had encountered his own rogue trading scandal as the head of the Delta One team–on Delta One just like Kerviel–and the head of ETFs.
Adoboli had joined UBS years before, despite a push to temper RegSHO regulations, they were still able to trade billions of shares on a daily basis and not budge the price. In 2006 he had been promoted to the ETF desk, just as UBS had been relentlessly short selling stocks like Sedona, Overstock (featured in Patrick Byrne’s documentary on naked short selling) and Taser, making massively illegal short selling/short sales for nearly 4 years. **This was also the year that Chris DiIorio–as seen in recent Epstein file dumps–had been telling the FBI tips about major short sellers.**
>“**You may only place a short sale order through the Service if**
>**you designate it as a short selling order by indicating "N" in**
>**tag 114 (Locate Required) in FIX message format. By doing**
>**so you represent and warrant that:**
>(i) You have a presently exercisable and unconditional
>right to vest the securities to which the order relates in
>the purchaser of such securities and
>(ii) If you have borrowed the securities or obtained a
>“Locate” confirmation from the lender that it has the
>securities available to lend, the lender has the
>securities available to lend you.”
Not only did Adoboli witness the ‘08 crash there but it was as reports from the use that shares of companies like Fannie Mae and Freddie Mac…” “more than 10x the number of GSE shares issued” primarily driven by market makers like Knight Capital & Citadel (also in DiIorio’s comments to the FBI).
# 7. Mace Windu
The trader named Mace Windu made a fuck ton of money at this time for UBS on their ETF desk as articles like “At UBS, It’s the Culture that’s Rogue” were printed in 2008 & 2009. He had built an “oasis of profit” for the Swiss bank.
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He began to short a number of companies, one of which I reviewed while seeing Dr. Trimbath’s notes in her book “Naked, Short and Greedy”:
>W**all Street’s Failure to Deliver:...2010, as 2009, was a year in which UBS failed to “properly supervise traders in the US…shares of one such shorted company called \[BML\] had significant FTD activity, including where since November 2010,** “monthly FTDs were as high as 69% (nice) of trade volume, with cumulative aged fails (potentially 1 year or older) of 1.8 million shares or nearly 12% of float…**UBS accumulated 77,000 FTD shares in BML or more than 80% of shares sold.** She adds that “problems at UBS were not brought to light until UBS began to review their internal procedures in response to a FINRA investigation. If UBS had used the stock borrow program available at most central securities depositories (including CDS), these trades would never have been discovered by FINRA or any government regulatory agency.”
#
# 8. Things Fall Apart
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Eventually, things took their told on Adoboli, as by the middle of the year targets were raised by 50% on his four-man team working 18-hour days. Back then I wrote:
>“By May 2011, things were starting to fall apart. One afternoon, he was at his desk in the middle of the trading room. Management was holding a town-hall meeting and employees were crowded around the glass barriers on each floor, looking down to where he sat…”
Eventually, what did him in were bets on the US pushing up the debt ceiling, and the later downgrade of the US credit rating via Standard & Poor’s was the nail in the coffin in August 2011. **He flipped to the wrong position as the market went one way, and he went the other, and he nearly lost the bank $12 billion in an instant which eventually settled to $3 billion then $2.2 billion as he tried to reach his work colleague stuck at Burning Man.**
In my old series, we sat with him in his Shoreditch London apartment as he drafted the following email to his bosses who told him that he was going to be their patsy:
>“...Sitting down, perhaps nervous from sweat, Adoboli opens his laptop, and begins typing:
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>“It is with great stress and disappointment that I write this mail. First of all the ETF (Exchange Traded Funds) trades that you see on the ledger are not trades that I have done with a counterparty as I previously described.
>I used the bookings as a way to suppress the PnL (profit and loss) losses that I have accrued through off book trades that I made….I**nitially, I had been short futures through June and those lost money when the first Greek confidence vote went through in mid June. In order to try and make the money back I flipped the trade long through the rally.**
>I will expect that questions will be asked as to why nobody else was aware of these trades. **The reality is that I have always maintained that these were EFP (Exchange for Physical) trades to the member of my team, BUC, trade support and John Di Bacco (Adoboli's manager).**
>I take full responsibility for my actions and the shit storm that will now ensue. I am deeply sorry to have left this mess for everyone and to have put my bank and my colleagues at risk.
>Thanks, Kweku.
>His mouse hovers over to the “Send” button. Click.”
Within moments of receiving that email Project Bronze was launched by UBS to figure out what had happened. He was eventually arrested, and even an arresting officer had trouble filling out the paperwork since he had no idea how many 0’s to put in a billion.
Adoboli was known as the biggest fraud in UK banking history who, like Kerviel, nearly nuked his old employer.
But the banks survived. Somehow.
Why does that matter?
And what happens when they don’t?
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# 9. Meet Nick Leeson…and a Bank that Did Fail
In 1995, Nick Leeson was another derivatives trader whose naked hedge–like Adoboli and Kerviel before him–sunk Barings Bank, the UK’s oldest bank. Though much was made about Leeson–even a movie starring Ewan MacGregor and his bare ass–less was said about Barings’ shell of a company.
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When Barings went under, the Dutch bank ING bought it for 1 GBP, taking all of its liabilities through the subsidiary ING Barings which was then sold to ABN Amro and folded into its European division. Though from there, we don’t know much more.
You see because in the same way when you run a merchandise table and promise Rick Astley shirts but have none, you’re fucked. You need to come up with them and fast.
**But the same way you might rent a flat or apartment and need a guarantor, ING became the mommy daddy hybrid ready to clean up problem child Baring’s messes. It takes the problems off the tables (the problems being its liabilities), and Barings problems became ING’s problems.**
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So again, why does this history story matter?
# 10. Let’s Circle Back
We’ve seen many bits and pieces so far that have shown up from the perspective of, well…naked trading.
Short squeezes might not be a tough sell either from our merch table example, whether from the friend’s expecting super rare Astley swag, or people on the sidelines wanting to bid on it.
But I mentioned spoofing too. And there might be a context that will slowly start to settle in.
# 11. Spoofing, Revisited
Spoofing has been used by a shit ton of market makers like Citadel, Susquehanna, Wolverine, etc. throughout this journey. However, I did want to focus on a specific type of spoofing but a favorite friend of ours: Jamie Dimon and J.P. Morgan.
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Alongside HSBC (to me, best known for working with Mexican cartels and helping them set up bank accounts), JP Morgan Chase sat with the Hong Kong based bank to engage in widespread spoofing specifically with the price of precious metals.
>
>“A recent article in the New York Times alleged the two companies have earned billions of dollars from what could be a gigantic, market manipulation. A**llegations state that JP Morgan and HSBC spread a rumor that the value of silver would depress dramatically. Of course, the claims were artificial, but because they owned such a substantial cut of commercial net short silver futures, they were essentially the silver market makers.”**
Kind of like our merch table scenario, where you might be the one posting random Reddit comments saying the merch was trash to buy it less (“I heard that merch table had bed bugs! Stevie Ray Vaughn-cat was overrated let’s be honest…”), you had both banks starting rumors to artificially depress the price. They did this because whatever the silver price was (let’s say $10) they wanted it to go DOWN (let’s say $1).
Chase was involved in this massive spoofing scandal and eventually settled and was asked to pay nearly $1 billion (really, fucking chump change) for years of spoofing the precious metals market. The practice had ended in 2016, but had started…in 2008. Not only that, but people KNEW it was going on SINCE it started in 2008:
>“The order finds that, from at least 2008 through 2016, JPM, through numerous traders on its precious metals and Treasuries trading desks, including the heads of both desks, placed hundreds of thousands of orders to buy or sell certain gold, silver, platinum, palladium, Treasury note, and Treasury bond futures contracts with the intent to cancel those orders prior to execution. Through these spoof orders, the traders intentionally sent false signals of supply or demand designed to deceive market participants into executing against other orders they wanted filled. According to the order, in many instances, JPM traders acted with the intent to manipulate market prices and ultimately did cause artificial prices.”
>
**CFTC’s own reporting said that while JP Morgan owned nearly 43% of all net short positions on gold, it owned NEARLY 70% of all short positions on silver! A member of the Gold Anti-Trust Action Committee said it was nearly impossible to figure their position because so much of these shorts on silver futures with the COMEX were obscured by the OTC derivatives market.**
# 12. So Why Was JP Morgan Short?
This gets us to the crux of where everything starts to point, something that many apes have discovered and I only discovered recently but many knew about back when this entire spoofing scandal first started in 2008.
Why was that?
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In “The Big Short”, there was a scene talking about where we had Mark Baum talking opposite a bullish investor named Bruce in an Ali v Foreman of the Financial World debate. In that scene, just as Baum was dragging his ballsack of truth across Bruce’s fivehead, we saw everyone’s phones pinging with news that Bear Stearns had JUST received a loan from JP Morgan: [https://www.youtube.com/watch?v=TpCb3xjh-Kk](https://www.youtube.com/watch?v=TpCb3xjh-Kk) Bruce says he’d buy more, as Baum’s team watches Bear Stearns’ stock price drop faster and faster from 41 to 39 to 37 to 32 to 29…plummeting…in those moments as Bruce says “no investment bank has ever failed unless caught in criminal activities…”, you realize the reality of it all as nearly a bit over a year earlier while Bear Stearn’s price was $170, it would later go up in smoke.
The timeline had gone like this:
* Mon Mar 10: Liquidity crunch for Bear Stearns
* Wed Mar 12: “By Wednesday March 12, Bear Stearns CEO Alan Schwartz was compelled to go on CNBC to try to quash reports that Bear was running out of money and that other firms didn’t want to do business with it anymore.'
* Thurs Mar 13: “chwartz notified the Federal Reserve that it would have to file for bankruptcy protection the following morning. Instead, the Fed arranged for an emergency bridge loan. Then, Friday evening, Fed officials told Bear executives that they had to find a buyer for the firm. Only one serious suitor emerged – JPMorgan.”
Friday March 14th was when Baum had battled Bruce as the price dropped to $30. Nearly a week later, the purchase price was pushed to offer as $10 a share until it eventually had Bear Stearns go for $2 a share.
The Fed offers to help the fire sale, with JP Morgan taking on its riskiest assets. Even a prevailing view–despite JPM misleading investors over billions worth of bad mortgages it later settled over the government with–was that we should be nice to JP Morgan. Later, Barney Frank, chairman of the House Financial Services committee during the crisis said “I think having pressed JPMorgan Chase to take over Bear Stearns, it was unfair to penalize them for the bad acts.”
JP Morgan had seemingly gotten all of the best assets and made away like a bandit.
Except some argue for one thinking.
Lurking in the balance sheet, something which Dimon and the rest of his team may have known was something that would come up time and time again for Jamie & Co:
*Processing img 73buhlpuq8hg1...*
JP Morgan had just bought Bear Stearns, and with it, a disastrous and massive short position on silver that had been brewing for nearly two years.

**TL;DR:**
* **This is one in a 3-part series investigating the background behind the GME-SLV swap.**
* **After revisiting what "Exchange for Physical" means in the context of failing naked trades, we briefly revisit famous rogue trader Jerome Kerviel (who naked shorted the futures marked while his French bank was conducting fraud with MBSes, trying nearly 1000 times to hide his trades). We discover that his naked trade sank the stock market in early 2008, and his standalone naked trade nearly sunk Societe Generale but also led to an emergency cut in the fed funds rate in the US while lending was constricted.**
* **Looking back at UBS' Adoboli, we find that UBS was one of the banks conducting widespread naked shorting (as seen in Chris DiIorio's FBI tips on recent posts) and UBS nearly collapsed over his naked bet. However, while banks like SocGen and UBS survived, Barings did not with their rogue trader that made a naked bet as well. ING absorbed Barings' liabilities as when banks sometimes do when they absorb other failing banks.**
* **Since the start of the financial crisis in 2008, JPMorgan (alongside HSBC) had been engaged in massive spoofing of precious metals fraud to drive prices down for metals, including silver. Why might JP Morgan have been doing this? Because in 2008, after buying a collapsed Bear Stearns, Jamie Dimon's JP Morgan Chase ALSO inherited what amounted to a massive and dangerous short position in silvers futures that now JP Morgan had on their books. JPM is the main custodian for SLV.**

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