Central Bank Says Blockchain Is Easily Manipulated, as JPMorgan Chase Faces Fine for Manipulation

The Commodity Futures Trading Commission (CFTC) announced on Monday that JPMorgan Chase & Co. was charged with trying to manipulate the US Dollar International Swaps and Derivatives Association Fix from 2007 to 2012.

Known as ISDAfix, the rate is a benchmark in the massive global market for interest rate swaps, a type of derivative. As of November 2017, the amount outstanding in over-the-counter interest rate swaps was over $542 trillion.

JPMorgan has a long history with derivatives. Its team is widely credited with the invention of the credit default swap and the concept of selling them to investors.

The firm has agreed to pay a fine of $65 million to settle the latest charges of manipulation.

The fine is a follow-up to a related scandal, the Libor scandal, which was uncovered in 2008. Regulators found 16 banks guilty of collusion in trying to rig a key global interest rate used in contracts worth trillions of dollars. JPMorgan was one of the first US banks fined in that scandal. The 16 banks were fined a total of $2.3 billion.

In the ISDAfix rigging, the CFTC found that JPMorgan traders tried to manipulate the interest rate benchmark by publishing false rates.

The finding comes amidst an extensive report from the Bank for International Settlements, a central bank based in Switzerland, that condemns Bitcoin, cryptocurrencies and its underlying decentralized blockchain technology as being too easily manipulated and not trustworthy.

The report joins a chorus of condemnations about Bitcoin from influential figures including billionaire investor Warren Buffet, JPMorgan Chase CEO Jamie Dimon and Microsoft billionaire Bill Gates.

US banks continue to debate Bitcoin’s relevance, reaching no consensus about its future or the scope of its impact on the current financial system. Bank of America is one of the few banks to go on record in February to explain how and why cryptocurrencies are a threat to its business.

Violation Tracker reports that JPMorgan has racked up 95 fines totaling $29.6 billion since 2000. The latest violation corroborates accounts of the systemic and harmful wrongdoing perpetrated by big banks, often through derivatives, which came to light during the financial crisis of 2007–2008, feeding persistent conclusions that the banking industry is a coordinated and calculated network of manipulations.

Goldman Sachs, Barclays PLC and Citigroup faced similar charges of ISDAfix benchmark manipulation, and paid fines in 2015 and 2016.

 

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