Futures Market Fraud

Fri, Oct 30, 2015 - 11:56am

As we begin another Spec rinse cycle on The Comex, we thought it best to remind everyone once again of the fraudulent nature of the short selling that takes place there.

The central component of any futures market is the physical asset that backs the exchange. Though we can't be certain of exactly how much gold is in the Comex vaults (recall the disclaimer added in June of 2013: https://truthingold.blogspot.com/2013/06/the-comex-confirms-that-its-gol...), we can be certain that it is nowhere near the amount needed to settle the thousands of paper claims written against it.

And it is the unlimited ability of the "market-making" Bullion Banks to create these paper claims that lies at the heart of the matter.

Your latest example of Bullion Bank price manipulation and suppression through the use of this unlimited leverage has occurred this month. First, let's look at the CME Gold Stocks data as supplied by the CME Group. Note that the two reports below are dated October 1 and October 28:

The most important item to note: On October 1, the total amount of gold shown to be in the Comex vaults was 6,850,580 troy ounces. As of October 28, this amount had fallen to 6,700,799 troy ounces for a total decline of 149,781 ounces.

In a fair market, this decline in the total amount of the asset backing the paper contracts would force an equivalent decline in the number of contracts available on the exchange. Let's assume two things for the sake of creating a more fair futures market:

  1. That all gold MUST be readily deliverable. No more of this registered/eligible nonsense.
  2. Of course, not every contract holder will demand delivery but this does NOT grant the "market makers" the ability to create infinite amounts of derivatives, either. So, let's set a fair leverage and multiplier at 5X. This means that, for every physical ounce backing the exchange and shown in their vault, a Bullion Bank can create five "paper" ounces of derivatives.

Under this formula, and assuming that all 6.7MM ounces of gold currently shown in the Comex vaults is for sale/delivery, this sets the maximum number of contracts available at 335,000.

6,700,000 X 5 = 33,500,000

33,500,000 divided by 100/oz per paper contract = 335,000 contracts

Without the Bullion Banks having the unlimited, infinite ability of creating new contracts each day, the price of gold would have to rise and fall to reach an equilibrium where equal amounts of buyers and sellers exist...much like how the market for individual equities operates (https://www.tfmetalsreport.com/blog/7214/inherent-unfairness-comex).

In this "fair" system, the only way that The Bullion Banks (market makers) would be allowed to create new contracts was IF they deposited more metal (collateral) for potential delivery. If JPMorgan wanted to issue 1,000 new Dec15 contracts to meet demand, they would first have to deposit an additional 20,000 ounces of readily-deliverable gold.

20,000 ounces with 5X leverage = 100,000 ounces of paper

100,000 ounces of paper at 100/ounces per contract = 1,000 contracts


As noted above, between Oct 1 and Oct 28, the total amount of gold shown to be held in the Comex vaults FELL by 150,000 ounces. Theoretically, this should have restricted The Banks' ability to create new leverage. Instead, this decline in the amount of collateral backing the exchange didn't matter at all!

Again, using the data generated by the CME itself, we can go back and review the total amount of contracts (open interest) on the Comex exchange over the same time period.

October 1 total Comex gold open interest: 419,016 contracts

October 28 total Comex gold open interest: 470,525 contracts

This means that while available gold (collateral) was declining by 150,000 ounces, The Bullion Banks were free to create over 5,100,000 new ounces of "paper gold".

470,525 - 419,016 = 51,509 contracts

51,509 contracts X 100 ounces/contract = 5,150,900 ounces of paper gold

AND THIS IS THE INHERENT UNFAIRNESS OF THE COMEX PAPER DERIVATIVE PRICING SCHEME. In fact, it's hard to understand how this doesn't constitute criminal fraud. Why? Let's look at the definition of "fraud": https://legal-dictionary.thefreedictionary.com/fraud

Fraud must be proved by showing that the defendant's actions involved five separate elements: (1) a false statement of a material fact,(2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result.

So, let's see....

  1. "A false statement of material fact." Is it a "material fact" that The Banks have an unlimited ability to leverage the available gold collateral that backs the exchange? Was the CME Group attempting to protect themselves in this point by adding the Gold Stocks disclaimer in 2013?
  2. "Knowledge on the part of the defendant that the statement is untrue". In this instance, the "statement" in question is the implied representation of physical gold behind each contract. The infinite creation of paper contracts would certainly seem to fit this part of the definition.
  3. "Intent of the part of the defendant to deceive the alleged victim". Without question, this is the case. The Banks deceive investors and traders through the creation of paper contracts that have no physical asset backing.
  4. "Justifiable reliance by the alleged victim on the statement". This one's a little fuzzy. Can it be "proven" that all of the momentum-chasing Spec trading funds only trade paper contracts based upon their "reliance" that the exchange operates freely and fairly?
  5. "Injury to the alleged victim as result". Well, this one's easy. Continuing below...

The "injury" is financial and we are once again watching it play out in real time. After the FOMC statement of September 17, sentiment in the gold "market" began to turn from bearish. After the September NFP employment report of October 2, sentiment got downright bullish. Over the course of the next 3.5 weeks, the paper price of gold rallied from an October 1 close of $1114, to an intraday high if $1192 on October 15 and a Comex close on October 28 of $1176.

As noted above, over this same time period, The Bullion Banks created over 5.1MM new ounces of paper gold in order to meet the demand coming from the now-bullish trading and managed money funds as well as individual investors. Without this unbacked (fraudulent?) new supply of paper, how much higher would have prices risen? We'll never know but it's certainly fair to say that prices would have peaked much higher than just $1192. These are gains that the speculators were never allowed to realize, thus, the alleged victims were in fact "injured" as a result.

So, there you have it. Does this meet the criminal definition of "FRAUD"?

Finally, conspiracy to commit fraud often also includes a plan/intent by the perpetrator to cover up their crime and it appears that we are seeing that once again this week.

On Wednesday, the latest FOMC statement was issued after the Comex had closed for the day. The low-volume selling that occurred on the Globex after-hours exchange drove the price of gold down over $20. By the time the Comex re-opened on Thursday, Spec stop-loss orders were immediately triggered. This drove prices down even further and the Spec selling allowed The Banks the ability to buy back and close some of the very same Comex contracts that they had deceitfully issued in the previous weeks. In fact, the final open interest data for Thursday shows that, while prices fell $29 from Wednesday's close, total open interest also fell by over 12,000 to 458,800 contracts.

In summary, do you now see how this works? The Bullion Banks issue paper contracts backed with gold that they do not have. In doing so, they cap price and stall momentum until a news item comes along that sends price lower. As speculators flee back out of the "market", The Banks use this selling to buy back the ill-gotten paper contracts that they should never have been allowed to create in the first place.

The only remaining question is: Does this constitute criminal fraud? Perhaps an industrious young prosecutor at the Lower Manhattan branch of the U.S. Attorney's Office would be willing to take a look? Instead of a civil case involving the difficult-to-prove notion of "market manipulation", maybe a criminal case using the CME's own easily-verifiable and public statistics would be possible? I don't know but it's worth a shot.

In the meantime, as in the movie "War Games", the only winning move is not to play at the Comex "casino". Anyone crazy enough to wander into this Den of Vipers (https://www.tfmetalsreport.com/blog/7110/den-vipers) will soon prove again the old idiom regarding "a fool and his money". Your best option remains the consistent stockpiling of physical metal, fully allocated and outside of the Comex and Bullion Banking system, as you await the day this fractional reserve derivative pricing scheme finally collapses.


About the Author

turd [at] tfmetalsreport [dot] com ()


Oct 30, 2015 - 12:49pm



Oct 30, 2015 - 12:50pm


1st! now to read.

Oct 30, 2015 - 12:54pm

Top 5


Oct 30, 2015 - 12:59pm

Where is Marchas?

So on Wednesday morning my wife and I were driving to a nearby town to work on our rural place, and I am closely watching DUST on my phone. My plan was to stay in until the AU price had retraced back down to 1120-ish.
I told me wife, "We have a 15% gain."
She said, "You better put on a stop to lock most of that in."
I had to agree. So I put in a stop loss order a buck below the present price.
A few minutes later I said "We have a 20% gain.
She replied, "Why don't you move your stop loss up." I moved it up to .75 below the current price
Very practical that woman is.
Then we went into a canyon and lost reception. When we came out we stopped for lunch and I fired up the laptop. I had been stopped out on a 78 cent pullback. So I looked the other way and we worked on installing rain gutters and feeding them into a collection tank at our place the rest of hte day. Looking at charts Wednesday evening made me really wish I had put that stop loss on about .04 lower. I got stooped out by three lousy cents. It cost me dearly in light of Thursday's action. But there are no regrets. How can you know what price it will pull back to?
We had a nice gain. My wife patted me on the back. I patted myself on the back.
Looking for a bullish entry point now. We'll get back into SGDM, and perhaps a bit of NUGT, when the leghounds are done.

By the way, it is better to buy put options on your favorite instrument when we expect a smash. As price falls, the implied volatility increases, making the price of puts go higher. If the fund manager (direxion) is skimming, causing the price to fall incrementally, the puts also gain by this action. The only downside I see is the "time decay" effect lowering your price as the days pass, so you don't want to stay in too long.

I wish my retirement plan would let me trade options.

Oct 30, 2015 - 1:08pm
Oct 30, 2015 - 1:11pm

Obama's Resume

1. First President to be photographed smoking a joint.

2. First President to apply for college aid as a foreign student, then deny he was a foreigner.

3. First President to have a social security number from a state he has never lived in.

4. First President to preside over a cut to the credit-rating of the United States.

5. First President to violate the War Powers Act.

6. First President to be held in contempt of court for illegally obstructing oil drilling in the Gulf of Mexico.

7. First President to require all Americans to purchase a product from a third party.

8. First President to spend a trillion dollars on "shovel-ready" jobs when there was no such thing as "shovel-ready" jobs.

9. First President to abrogate bankruptcy law to turn over control of companies to his union supporters.

10. First President to by-pass Congress and implement the Dream Act through executive fiat.

11. First President to order a secret amnesty program that stopped the deportation of illegal immigrants across the U.S., including those with criminal convictions.

12. First President to demand a company hand-over $20 billion to one of his political appointees.

13. First President to tell a CEO of a major corporation (Chrysler) to resign.

14. First President to terminate America’s ability to put a man in space.

15. First President to cancel the National Day of Prayer and to say that America is no longer a Christian nation.

16. First President to have a law signed by an auto-pen without being present.

17. First President to arbitrarily declare an existing law unconstitutional and refuse to enforce it.

18. First President to threaten insurance companies if they publicly spoke out on the reasons for their rate increases.

19. First President to tell a major manufacturing company in which state it is allowed to locate a factory.

20. First President to file lawsuits against the states he swore an oath to protect (AZ, WI, OH, IN).

21. First President to withdraw an existing coal permit that had been properly issued years ago.

22. First President to actively try to bankrupt an American industry (coal).

23. First President to fire an inspector general of AmeriCorps for catching one of his friends in a corruption case.

24. First President to appoint 45 czars to replace elected officials in his office.

25. First President to surround himself with radical left wing anarchists.

26. First President to golf more than 150 separate times in his five years in office.

27. First President to hide his birth, medical, educational and travel records.

28. First President to win a Nobel Peace Prize for doing NOTHING to earn it.

29. First President to go on multiple "global apology tours" and concurrent "insult our friends" tours.

30. First President to go on over 17 lavish vacations, in addition to date nights and Wednesday evening White House parties for his friends paid for by the taxpayers.

31. First President to have personal servants (taxpayer funded) for his wife.

32. First President to keep a dog trainer on retainer for $102,000 a year at taxpayer expense.

33. First President to fly in a personal trainer from Chicago at least once a week at taxpayer expense.

34. First President to repeat the Quran and tell us the early morning call of the Azan (Islamic call to worship) is the most beautiful sound on earth.

35. First President to side with a foreign nation over one of the American 50 states (Mexico vs Arizona).

36. First President to tell the military men and women that they should pay for their own private insurance because they "volunteered to go to war and knew the consequences."

37. Then he was the First President to tell the members of the military that THEY were UNPATRIOTIC for balking at the last suggestion.

Oct 30, 2015 - 1:14pm


it's criminal fraud! But just like the fall of the USSR, when all the Oligarchs stole everything the could before it completely crashed, so to in the USSA. The Elites are stealing everything not nailed down, right in front of our eyes!

Oct 30, 2015 - 1:21pm

USSA elite theft


Then we should expect a forced confiscation of gold, and the outlawing of gold ownership in the US after the crash, collapse, reset. No doubt, they'll offer a cool $1K per ounce, the set the price of internationally traded gold 20x higher after we have forked it over.

The house never loses.

Where can a little person invest to protect?

Oct 30, 2015 - 1:24pm


Make all participants in the Comex codefendants in the fraud against the general public buying stocks and physical in reliance that the Comex is legitimate. Join as codefs the brokerage firms and others participating in those Markets (such as the exchanges and dealers) and make the claim they have a fiduciary duty to disclose the fraud to those that are buying associated products but not directly participating in tbe Comex. This could extend to the US Gov and regulators as the wicket gets stickier. The real success would be to join as CoDs specific named individuals.

If only the US had statutes and laws! Music to Camelot fades in at this point.

(Always deal with codefendants rather than conspiracies. Fewer elements of proof)

Oct 30, 2015 - 1:39pm

Gold Confiscation

Not sure that they will come after 0.001% of the population that holds PM's. But there is that nasty little thing called the 2nd Amendment, currently keeping them at bay. NSA knows all of our electronic transactions, pay cash or store abroad.

Oct 30, 2015 - 1:42pm

Shanghai Gold Exchange

Shanghai Gold Exchange Withdrawals Week Ended October 23, 2015


TF Metals fan
Oct 30, 2015 - 1:45pm


The latest Andrew Maguire. Still wondering about the success of that physical stock market. Edit: thanks Tyberious!


Oct 30, 2015 - 1:45pm

Here's an idea!

Justin Beiber for Prez of USA. After all, if a Kenyan Mao-Mao can do it, why not an ex-pat Canadian idiot? He's just gotta be better than Broom-Hillary, and probably popular enough amongst young people to win the popularity/reality show that is US politics.

He could give a live concert in Iraq for ISIS, to show them how wonderful American pop-culture is, compared to the flimsy promises of martyrdom. After all, a Bieber in the hand is worth 40 virgins in the bush.......isn't it?

Oct 30, 2015 - 1:51pm


Don't have to consolidate all of them for trial. See how many you can turn against the primary targets, try the most culpable first (most evidence and guilt), see how many want to turn against the leaders, grant them reduction in charges or immunity if they testify truthfully, convict a few and then work out pleas (criminal) on the remaining or drop charges if peripheral.

Watch the system correct.

Oct 30, 2015 - 1:52pm
Oct 30, 2015 - 2:01pm

The Story Of My Gun

Today I swung my front door wide open and placed my Remington 30.06 right in the doorway.

I left 6 cartridges beside it, then left it alone and went about my business.

While I was gone,

> the mailman delivered my mail,
> the neighbor boy across the street mowed the yard,
> a girl walked her dog down the street, and
> quite a few cars stopped at the stop sign near the front of my house.

After about an hour, I checked on the gun.

1) It was still sitting there, right where I had left it.
2) It hadn't moved itself outside.
3) It certainly hadn't killed anyone, even with the numerous opportunities it had presented to do so.
4) In fact, it hadn't even loaded itself.

Well you can imagine my surprise, with all the hype by the Left and the Media about how they kill people. Either the media is wrong or I'm in possession of the laziest gun in the world.

The United States is 3rd in Murders throughout the World.
But if you take out just 4 cities

------Washington DC and
------New Orleans,

the United States is 4th from the bottom, in the entire world, for murders.

These 4 Cities also have the toughest Gun Control Laws in the U.S.

ALL 4 of these cities are controlled by Democrats.

It would be absurd to draw any conclusions from this data ----- right?

Well, I'm off to check on my spoons.

I hear they're making people fat.

Oct 30, 2015 - 2:18pm


Place your gold and silver at the front door and let us know how that goes. :)

Oct 30, 2015 - 2:22pm



I bet if I placed a stack of gold and silver on one side of the door jam and a stack of FRNs on the other side, that the FRNs would get stolen but the gold and silver would remain.

Oct 30, 2015 - 2:41pm


At least the COMEX provides N. American jobs, even if they are of a rather fraudulent nature.

Outsourcing really hit me this week. In early September I booked a March flight from the Pacific North West to Florida, through probably the largest online booking agency, with a change at a hub city. This week I was informed that the second leg of my flight was canceled and replaced with a much later flight. Upon checking schedules I found that the airline now had two flights during the day on this routing, instead of only one which I had booked. So rather than accept the airline's computer run algorithmic decision that my booking agency had automatically accepted I simply wished to change to the earlier flight. Simply, right?

Well not exactly. I spent an hour talking to Cairo while the agent for the booking insisted I remain on the phone continuously. I suspect that was to prevent any more incoming calls. Between the agent and her supervisor they were able to get the itinerary changed as I requested. But however little they are paid it must have cost more that what a well paid and trained N. American agent could easily do within 5 minutes max.

The proof came when I checked my itinerary on airline website and found that my e-ticket had to be re-issued. The airline agent did this manually easily within 5 minutes.

EDIT: That's Cairo, Egypt not Cairo, Illinois or Georgia.

A. Tad Askew
Oct 30, 2015 - 2:58pm

OT, but of interest....

In the last 5 minutes, the Dow newsfeed has 7 separate, but identical headlines:

Rpt - US Mint American Eagle Gold Coins sales fall 74.9%

now corrected to down 73%....

You would think someone really wants us to know there's no demand for this shit...


Oct 30, 2015 - 3:05pm

Out shopping at Lunch

Got a call from the LCS

Had a deal spot + $2

Forced against my will to part with some fiat for some real money


Oct 30, 2015 - 3:08pm

Sales Down

Everyone waiting for lower price fabricated by the PPT

Oct 30, 2015 - 3:12pm

That Andy Maguire article

Nothing would make me happier than to watch the big banks devour each other.


<-- Lloyd B devouring his son

Rodney Dangerfield - "Now I know why tigers eat their young" - Caddyshack
Oct 30, 2015 - 3:25pm

Andy M

Much as I would like to se this come about, I fear this is just another "the bullion banks have their tits in the mangle " story from Andy and king world screamers,!

Oct 30, 2015 - 3:33pm

If the bullion banks are now

If the bullion banks are now turning on each other, then I'd expect to see a lot of buying when gold hits the bottom of the up channel. That would be the perfect place to screw the banks that are short, force a powerful bounce at that level and keep the up channel intact.

I suppose what Andy M says might be consistent with Sinclair's inside source too.

Oct 30, 2015 - 3:34pm


This is uglier right?

DAGEORGE42 garth
Oct 30, 2015 - 3:38pm

re CoT

on the surface, yes a bit uglier, but o/i has come in a little since the tuesday cut off so likely isn't a whole lot worse than last week - will take a few weeks for them to cover these shorts though...

Oct 30, 2015 - 3:50pm

To be discussed in today's podcast

With the data from today's latest CoT:

Over the past four weeks, from 9/29 through 10/28...and as price only rose from $1127 to $1166...The cartel Bullion Banks increased the size of their GROSS short position by 81,940 contracts from 222,678 to 304,618.

Again...81,940 contracts at 100 ounces/contract is 8,194,000 ounces. This means that, in October, The Banks shorted...without additional physical backing...over 255 metric tonnes of gold or about 10% of total, global annual mine supply.

And this is fair? And this is legal??

Oct 30, 2015 - 4:00pm


sold a little gdxj otm puts, GDXJ at 50 dma, possibly bottoming. But I have 1.20 per share cash and its otm. 29% annual yield

Oct 30, 2015 - 4:01pm


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