first majestic silver


Precious Metal Investment Expert
January 21, 2014

While the Flow of Gold from the West to the East continues, Western Banks Disparage Gold Ownership and Engage in the Largest Financial Crime Spree in World History.

As we enter the New Year and amid a list of bearish reports on gold, issued by most of the major Western banks, the flow of the yellow metal from the West to the East continues while Western banks are found guilty of a multitude of criminal activities including cases related to the sub-prime crisis, credit default swaps, mortgages, tax evasion, market rigging and insider trading, just to mention a few. 

While main stream media applaud the latest results of some of the major banks in the world, they hardly mention anything about how some of these banks have been involved in multiple cases of litigation.  More incredible is how most analysts refer to these banks as well run institutions.   And, despite being fined billions of US dollars, not a single person has been prosecuted. Can you imagine what would happen if an individual defrauded a bank?  To make this more unbelievable, the culprits are not any small offshore bank, but include some of the worlds’ largest banks such as HSBC, JP Morgan Chase, Deutsche and Barclays.

Perhaps the biggest transgressor is JP Morgan Chase (JPM), the largest bank in the US and the sixth largest bank in the world with $2.39 trillion in assets. Only last week, JPM agreed to pay $1.7 billion to resolve a Justice Department investigation into its role in Bernard Madoff’s multibillion-dollar Ponzi scheme.

The giant Wall Street bank, which served as Madoff's primary banker, acknowledged that it failed to alert authorities to suspicious activity in Madoff's accounts as required under federal law.

JPMorgan admitted violating two U.S. laws: failing to maintain effective anti-money laundering program and failing to file a suspicious activity report.

The agreement comes five years after Madoff's arrest rocked Wall Street and investors worldwide. He acknowledged stealing billions of dollars from investors, falsely claiming for decades that he used their money to make enormous gains in the financial markets. Instead, he used new investor money to make payments to earlier investors while making very few trades.

But, if you think this is the only transgression JP Morgan has made, think again. While, JPM brought in nearly $24 billion in revenue last quarter, it reported a net loss of $400 million, widely attributed to legal fees. The company's settlements since January add up to at least $20 billion!

Last year, in an agreement settling many U.S. claims over its sale of troubled mortgages, JPMorgan Chase agreed to pay a record $13 billion, in a deal announced by the Justice Department. The plan includes a $4 billion payment for consumer relief, along with a payment to investors of more than $6 billion and a large fine.

In addition to this JPM has agreed to pay $4.5 billion to investors — including 21 major institutions — for the faulty securities.

In September and October last year the bank agreed to pay $1 billion to end investigations into the botched financial transactions of traders in London that cost the company more than $6 billion. In agreements with regulators totalling $1 billion and the largest bank in the US settled four civil investigations into its "London Whale" trading scandal and two more into the wrongful billing of credit-card customers.

JPM is among the many large financial institutions implicated in the LIBOR manipulation scandal, a key interest rate used in derivatives markets. The banks allegedly rigged the rates for profit, while costing other markets that use the rates - such as mortgage companies - billions. JPMorgan is one of banks Freddie Mac is suing over the LIBOR scandal.

The Bank of America and Citibank were also implicated in this scam as well as 16 non-U.S. banks namely, Bank of Nova Scotia, Bank of Tokyo-Mitsubishi UFJ Ltd, Barclays Bank plc., BNP Paribas, Credit Agricole CIB, Credit Suisse, Deutsche Bank AG, HSBC, Lloyds TSB Bank plc., Rabobank, Royal Bank of Canada, Société Générale, Sumitomo Mitsui Banking Corporation, The Norinchukin Bank, The Royal Bank of Scotland Group and UBS AG.

But, getting back to JP Morgan, in September, the bank paid refunded $389 million to 2.1 million credit-card customers and paid a fine after allegedly misleading and overcharging them.

Also, in September it paid $300 million to resolve an insurance lawsuit, splitting payment with Assurant Inc.

In August it paid $410 million to settle allegations that it manipulated U.S energy markets.

June cost the bank $842 million when it agreed to forgive debt owed to it by Jefferson County, Ala., where the company's securities deals led to the county’s bankruptcy in 2011.

JP Morgan was implicated in the MF Global fiasco and after months of a Federal investigation, agreed to return $546 million to customers of the failed brokerage.

In October of 2011, an amount of $1.5 billion suddenly disappeared from supposedly sacrosanct customer accounts.  Former New Jersey governor Jon Corzine was CEO of MF Global when it filed for bankruptcy in 2011. Of course when questioned at a congressional hearing Corzine denied any wrong doing and swore under oath that he had no idea what happened to the money.

What few people remember that MF Global took over the New York based financial services company Refco which was founded in 1969 as "Ray E. Friedman and Co." Prior to its collapse in October, 2005, the firm had over $4 billion in approximately 200,000 customer accounts, and it was the largest broker on the Chicago Mercantile Exchange. The firm's balance sheet at the time of the collapse showed about $75 billion in assets and a roughly equal amount in liabilities.

On October 10, 2005 Refco suddenly announced that its chief executive officer and chairman, Phillip Bennett had hidden $430 million in bad debts from the company's auditors and investors. As it turned out a receivable was owed to Refco by an unnamed entity that turned out to be controlled by Mr Bennett, in the amount of approximately US$430 million. What do you know? It was just another major financial scam.

Recently, Germany's top financial regulator reported that possible manipulation of currency rates and prices for precious metals is worse than the Libor-rigging scandal, which has already led to fines of about $6 billion.

The Bonn-based Bafin is investigating currency trading, joining regulators in the U.K., U.S. and Switzerland, who are examining whether traders at the world's largest banks colluded to manipulate the WM/Reuters rates, used by money managers to determine the value of holdings in different currencies.

At least a dozen firms have been contacted by authorities and more than 13 traders have been suspended, fired, or put on leave in the currency case. Regulators are examining how traders, who communicated in instant-message groups, exchanged information on client orders and agreed how to trade at the time of the fix, five people with knowledge of the probes said last month.

"That the issue is causing such a public reaction is understandable," Koenig said. "The financial sector is dependent on the common trust that it is efficient and at the same time honest. The central benchmark rates seemed to be beyond any doubt, and now there is the allegation they may have been manipulated."

Bafin interviewed employees of Deutsche Bank AG as part of a probe of potential manipulation of gold and silver prices, a person with knowledge of the matter has said in December. The U.K. finance regulator, the Financial Conduct Authority, is also reviewing gold benchmarks as part of its wider investigation into how rates are set.

Firms including Barclays Plc and UBS AG have been fined for manipulating Libor and related rates. The European Union fined six firms, including Deutsche Bank and Societe Generale SA, a record 1.7 billion euros ($2.3 billion) in December for rate-rigging. Ten people have also been charged in parallel U.S. and U.K. criminal investigations into the matter.

Last Wednesday, global investigations into alleged currency market manipulation intensified as U.S. regulators descended on Citigroup's London offices and Deutsche suspended several traders in New York, sources told Reuters. And, then on Friday, Deutsche Bank made a surprising announcement.

Deutsche Bank stated that it will withdraw from the London gold and silver benchmark price settings. What a “timely” coincidence!

Deutsche together with four other banks: Bank of Nova Scotia-ScotiaMocatta, Barclays Bank Plc, HSBC Bank and Société Générale, are involved in the twice-daily gold fix for global price setting.

The fixings are used to determine spot prices for the billions of dollars of the two precious metals traded each day.

In a statement issued by Deutsche as the reason for them withdrawing from the fix the bank said. "Deutsche Bank is withdrawing its participation in the gold and silver benchmark setting process following the significant scaling back of our commodities business. We remain fully committed to our precious metals business."

In mid-December, German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of benchmark gold and silver prices by banks. At the time, Deutsche declined to comment on the FT report.

Bafin reiterated in December that besides benchmark interest-rate LIBOR and Euribor rigging by banks, it had been looking at other benchmark-setting processes such as gold and silver price fixings at individual banks.

Deutsche has also been named in cases related to the sub-prime crisis, credit default swaps, mortgages, tax evasion and a decade-old lawsuit suit brought by the heirs of late media mogul Leo Kirch, who accuse the bank of undermining the business.

The bank set aside 1.2 billion euros for potential legal charges in the third quarter, wiping out profit and raising the total amount of legal reserves to 4.1 billion euros.

It seems that lying, cheating, rigging markets and insider-trading have become the order of the day for these large banks. And, as they try everything to disparage the benefits of owing gold, the Chinese view the precious metal in a very different light.

Unlike their Western counterparts, the Chinese view gold as money and thus it is always worth accumulating by selling potentially worthless foreign currency. And, while the Chinese government encourages its citizens to accumulate gold, Western banks try everything to discourage their citizens from owning gold even if it means suppressing the price of the yellow metal.

Western banks believe that gold will never play a monetary role again, and that with all their expansionary monetary policies, global fiat currencies will ultimately prevail.

Since 1971, Western central bankers have used fiat paper instead of a gold backed monetary system and therefore believe that gold will never be part of a monetary system again. Yet, a system based on exploding debt cannot be sustained. Furthermore, more individuals are becoming aware of the illegal actions of our major financial leaders. Also, they are losing confidence in the respective fiat currencies and are turning to tangible assets.

Our entire global financial is corrupt. And, while it is necessary to have a bank account in order to engage in transactions, it is equally important to have a store of wealth kept outside this system. And, the best way to do this is to own gold. 


The upward momentum in gold prices looks set to continue, and I believe that we will soon see a test of the key resistance level of $1275/oz.

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David Levenstein is a leading expert on investing in precious metals. Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.

His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. The largest gold refinery in the world use his daily and weekly commentaries on gold.

David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.

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