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The journey to justice and truth is often long and arduous, but must
never be abandoned. The alternative is to live a life lacking substance. But
neither should the journey be unnecessarily prolonged. These things tend to
creep up on you day by day, but we have passed the point of the CFTC taking
too long for deciding if the silver market has been manipulated in price.
Enough time has passed.
Having started in August 2008, we are now at the 3.5 year mark in the
current investigation into silver by the Enforcement Division of the
Commodity Futures Trading Commission (CFTC). Never has a similar
investigation taken this long. Considering that the current silver
investigation is the third such inquiry by the Commission into alleged
downside price manipulation by large commercial participants on the COMEX,
the agency has spent most of the past decade investigating silver. As
recently as this past November, the Commission reaffirmed that the silver
investigation is ongoing. Still, the issue is unresolved. http://www.cftc.gov/PressRoom/PressReleases/s...marketstatement
The current silver investigation began due to revelations I discovered
and wrote about in the CFTC’s Bank Participation Report of August 2008.
This report indicated one or two US commercial banks held a concentrated
short position which was unprecedented and uneconomic in terms of real world
supply and demand. I asked the question – how can one or two US banks holding
a short position equal to 25% of annual world production not be manipulative?
That question has not been answered by the Commission to this day. Later, I
discovered that it was basically only one US bank, JPMorgan, which was the
big COMEX silver short. target="_blank" http://news.silverseek.com/TedButler/1226344970.php
Not for a moment do I believe that the CFTC initiated the current silver
investigation (or the previous two) just because I wrote a few articles. The
key was that so many readers took it upon themselves to write to the
Commission and their elected officials about the issues of concentration and
manipulation in the silver market. Simply put, there would have been no
silver investigations had not great numbers of you petitioned the regulators.
Please think about that for a moment. It is beyond extraordinary that the
agency has investigated and continues to investigate such a small market like
silver. That can only be because of public pressure and that the evidence was
compelling. Most remarkable of all is that the core allegation in all three
silver investigations has remained the same – manipulative short
selling by large commercial interests on the COMEX.
In the two prior investigations of May of 2004 and 2008, the
Commission’s Division of Market Oversight (DMO) concluded that the
silver market was not manipulated. target="_blank" http://www.cftc.gov/files/opa/press04/opasilverletter.pdf
http://www.cftc.gov/ucm/groups/public/@new...treport0508.pdf
Particularly puzzling in the 2008 report was the contention by the DMO
that the concentration on the short side in COMEX silver wasn’t
unusually large and that the biggest short sellers regularly changed places,
so that there wasn’t one big permanent short. The report was issued on
May 13, 2008 or two months after JPMorgan acquired Bear Stearns and its
concentrated short position in COMEX silver. How the DMO could overlook the
transfer of the most concentrated short position in the history of the
commodity markets is beyond comprehension. Subsequently, I have come to
believe that Bear Stearns’ forced acquisition was caused by the giant
silver short position going against it (silver was at a 27-year price high at
the time of the takeover) and not mortgage-related difficulties. In this
article, I accused the DMO of lyi target="_blank"ng. http://news.silverseek.com/SilverSeek/1261415180.php
Unlike the current silver investigation, the previous investigations were
concluded by the Commission in months, not years. Timing aside, all three
silver investigations share a commonality apart from stemming from the same
basic core allegation of manipulative short selling. That commonality is the
Commission’s refusal to conduct a fair and balanced investigation. I confess
to being the instigator behind all three silver investigations (with you
being the enabler).Not once, in any of these investigations has the agency
ever contacted me or anyone I know who is familiar with the allegations. I
even complained to the CFTC’s Inspector General about the one-sidedness
of the process. How can you conduct a balanced investigation on manipulative
short selling when you only question one side, the shorts?
The real problem with the findings of the CFTC of no manipulation in their
previous investigations is two-fold.First, it
provides a shield and comfort to the perpetrators of the manipulation in that
they can continue to hide behind the agency’s findings in the
furtherance of an active crime in progress. The longer the CFTC takes to act
or report on its current investigation the comfort to the manipulators is
maintained, at a cost to nearly everyone else. Second, the prior findings put
the agency in a tricky spot. Because the Commission had previously found
nothing amiss in the silver market on two separate occasions, if the agency
uncovers any wrongdoing in silver in the current investigation it will,
effectively, contradict its former findings. Obviously, it will be loath to
do so.
The fact that the Commission will contradict its former findings should
it now find something wrong in silver may explain the unprecedented delay on
the part of the Enforcement Division to act. But the reluctance to reverse
the former findings is a weak excuse for the Commission to fail in its most basic
mission, namely, preventing fraud, abuse and manipulation. Most importantly,
the silver manipulation is a crime in progress and the Commission’s
delay in terminating it has allowed for untold continuing damage to thousands
of market participants at the hands of the manipulators. Not once, but twice
in 2011 did the silver market plunge by 35% in a matter of days on deliberate
price moves lower. It is impossible for a world commodity to suddenly plunge
35% in days without some radical change in real supply and demand in a free
market. Aside from proving that the silver market is still manipulated, these
price plunges would not have occurred had the Commission acted expeditiously
in concluding its current silver investigation.
Every day that the Enforcement Division stalls in concluding its
investigation allows the silver manipulation to fester. At the very least,
the Commission should have privately forced the end of the silver
manipulation by jawboning the big commercial traders before now. Jawboning large
traders with questionable positions is a time-honored Commission practice. It
is clear that the COMEX commercial traders are behaving in a collusive
manner. This can be seen in COT data which verifies the commercials generally
act in a unified manner and the practice of High Frequency Trading, which is
just a fancy term for trader collusion.
The present and ongoing nature of the silver manipulation cannot be
over-emphasized. This is what makes the situation so unusual. I understand
that the Commission has little real experience with intervening in an active
and ongoing manipulation. Like most regulatory and law enforcement agencies,
the CFTC deals with dissecting wrongdoing after the fact, rendering
punishment and then proscribing new rules to prevent a recurrence. I admit it
must be a daunting task for the agency to consider taking on the most
powerful of market participants, including JPMorgan and the CME Group, should
it act to end the silver manipulation. There has been no instance, of which I
am aware, of the CFTC ever busting up a manipulative crime in progress in
history.
Undoubtedly, this lack of experience is also responsible for the delay in
the Enforcement Division’s failure to conclude and act on its silver
investigation. But that doesn’t mean the agency shouldn’t step up
and do the right thing. After all, the case has largely been made for them
already by independent analyses and the verifiable data in the agency’s
own statistics. In addition, price action alone during 2011 points to a
manipulation in progress, as world commodities don’t suddenly plunge
35% for no good reason. In many ways, the Enforcement Division’s job
has been made easy by the thousands of petitions the agency has received in
matters related to silver. Certainly, the prime silver manipulator, JPMorgan,
has already been clearly identified.
There has never been a situation before of the public continuously
pressuring a regulator to end a crime in progress with that regulator
refusing to act. Such a situation only undermines confidence in our
institutions and the rule of law. Three and a half years is far too long for
the CFTC to investigate allegations involving the most serious market crime
possible – manipulation. Enough is enough. Either the agency should act
against the silver manipulation or fully explain why there is no
manipulation. This silver investigation has taken so long that at some point
blame moves from the manipulators to those responsible for ending it.
Undoubtedly, that transfer of blame has begun to occur.
This is the last time I intend to ask that you write to the Commission
or, more importantly, to your elected representatives. Simply ask your
Congressman or Senator why such an important investigation should take so
long. This investigation has taken so long that chances are that you might be
writing to a different elected official than previously.
Ted Butler
February 8, 2012
ggensler@cftc.govChairman Gensler
bchilton@cftc.govCommissioner Chilton
jsommers@cftc.govCommissioner Sommers
somalia@cftc.govCommissioner O’Malia
mwetjen@cftc.govCommissioner Wetjen
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