Banking Cartel, Fraud, and Antitrust - Where is the Enforcement Action?

Tue, Nov 17, 2015 - 10:58am

At some point, certainly, the concept cannot be lost on law enforcement officials that the banking cartel selling massive paper futures, naked or not, are perhaps violating the law. I say this somewhat in jest, because also at this point, there is clear evidence of the banking cartel taking massive, concentrated, short positions on the Comex, something the CFTC could, but won’t, do anything about.

Is the banking cartel engaged in fraud by selling naked shorts? The simple answer is not likely.

One way to look at the shenanigans on the Comex are through the prism of lawyers’ eyes, using state common law, such as fraud, deceit and misrepresentation. On the surface, it seems that the cartel banks engage in fraud on a daily basis, as they naked short the metals, causing massive price declines, which they then close out for huge profits at the bottom, only to do it again and again at opportune times like when the FOMC minutes are front run and the cartel banks make guaranteed profits. This is unfair, particularly to the longs that unwittingly buy the cartel’s paper, only to watch waterfall declines and stop runs, wiping out the pitiful longs, time and time again.

In the law there are several types of fraud.

In California, “fraud” and “deceit” are defined in California Civil Code sections 1572, 1709, and 1710. Civil Code section 1709 defines “deceit” generally as, “One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.” Civil Code section 1710 specifies four kinds of deceit:

“A deceit, within the meaning of [section 1709], is either:

The suggestion, as a fact, of that which is not true, by one who does not believe it to be true [intentional misrepresentation of fact];

The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true [negligent misrepresentation of fact];

The suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact [concealment or suppression of fact]; or,

A promise, made without any intention of performing it [promissory fraud].”

Subsection 2 of section 1710 covers negligent misrepresentations, whereas subsections 1, 3 and 4 cover intentional misrepresentations.

The tort of deceit or fraud requires: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974; see also Molko v. Holy Spirit Ass’n (1988) 46 Cal.3d 1092, 1108. Sometimes the tort of fraud or deceit is stated with four elements instead of five: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. See Service by Medallion, Inc. v. Clorox Co., (1996) 44 Cal.App.4th 1807, 1816.

A representation must ordinarily be an affirmation of fact, as opposed to an opinion. Under the Restatement Second of Torts section 538A, a representation is an opinion “if it expresses only (a) the belief of the maker, without certainty, as to the existence of a fact; or (b) his judgment as to quality, value, authenticity, or other matters of judgment.” Mere “puffing,” or sales talk, is generally considered opinion, unless it involves a representation of product safety. Hauter v. Zogarts (1975) 14 Cal.3d 104, 112.

“A misrepresentation need not be oral; it may be implied by conduct.” Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1567. Moreover, false representations made recklessly and without regard for their truth in order to induce action by another are the equivalent of misrepresentations knowingly and intentionally uttered. Yellow Creek Logging Corp. v. Dare (1963) 216 Cal.App.2d 50, 55.

“A ‘complete causal relationship’ between the fraud or deceit and the plaintiff’s damages is required. ... Causation requires proof that the defendant’s conduct was a “‘substantial factor’” in bringing about the harm to the plaintiff.” Williams v. Wraxall (1995) 33 Cal.App.4th 120, 132.

However, taking a careful look at the required elements to prove fraud, at least here in California, leads to a reasoned conclusion that the cartel banks are not engaging in fraud, because there is no misrepresentation taking place. They are simply selling what someone else is buying. That they are doing it in a managed pattern with superior knowledge to those hapless victims taking the opposite side of their transactions, is not fraud. There can be no fraud without justifiable reliance on the misrepresentations. Even if one wanted to make out a case of concealment fraud, none of the cartel banks are in a relationship that would give rise to a claim for concealment, because absent a suitable relationship, there is no actionable claim of concealment fraud that can be made.

Hence, the only way to make a case for fraud, would be if the cartel banks sold a short, that they could not deliver, thus knowingly making a promise with no intention of performing. Then, the Comex would step in and let their remedies work per the Comex rules. The buyer of the short would demand a remedy for the cartel bank failure to deliver. The remedy is not in kind, that is, delivery of metal; rather, the remedy is payment in fiat. After that, if the Comex wanted to punish the bank for selling a naked short, well, they could, and how would that matter to the buyer of the metal that did not get delivery? Further, the buyer could initiate a state court action and sue the cartel bank for fraud, that is, misrepresenting that they had a quantity of metal that they were selling when instead they had no such metal, thus engaging in common law fraud. But again, the remedy to the defrauded buyer would not be getting metal in exchange for being defrauded. The only remedy would be payment of fiat, after a judgment (or settlement, if the parties to the lawsuit wanted to resolve the case short of trial).

Hence, even if the banks were knowingly selling unbacked paper metal, there is no likely result that is going to end up in metal changing hands.

So, in this context, since the primary governing agency is unwilling or unable to stem the apparent manipulation of paper metal, through the primary and obvious means intended, some of us wondered if other laws or concepts might apply to show the illegality of what the cartel banks are doing.

Indeed, there are other laws, right on the books, that have been used before, to stop these illegal practices dead in their tracks, in areas of commerce other than on the Comex. One such concept are the laws known as antitrust laws, under the Sherman Act and Clayton Act. It is illegal for anyone to enter into a “contract, combination or conspiracy in restraint of trade.”

How hard would it be for someone, anyone, in the justice department, or in any of the 50 states Attorney Generals’ offices, to initiate a Sherman Act or Clayton Act antitrust action against any one of the cartel banks? Why are the banks off-limits on the very type of conduct that the Sherman Act was designed to curtail?

Mr. TF analyzes the COT report regularly, and in so doing, the positions of the cartel banks are without question, proof of massive, concentrated shorts. This “combination” is by definition, part of the conduct that the Sherman Act is designed to make illegal. It does not have to be a purposeful conspiracy, it only need be a combination.

The concept is crystal clear. Take for example, two gas stations on opposite corners. If each station owner sat down at breakfast, and made an oral promise that both would raise prices by ten cents, and if they then did both raise prices, then they both would be in violation of the Sherman Act, for entering into a combination in restraint of trade, that is, to artificially increase the price paid by consumers for their products.

It is a no-brainer.

But why no action by any law enforcement?

Answer that question and one is enlightened, and understands why we stackers stack.

About the Author


Nov 20, 2015 - 4:05pm


I guess the statutes and US Constitution are totally ignored within the State criminal legal system. If that is the case, then don't forget the State cost of buying off the jury. Must really be expensive now. If I was a juror, I would want big bucks to ignore both the facts and the law. Some do it for free. It is called juror nullification. your claims, nullification is not even necessary since nobody is following the law anyway. And what kind of percentage of criminal defendants pay taxes? You must be from the Hamptons...of course there are no criminals there. I am so confused.

My conclusion is that you prefer that criminals are neither arrested nor prosecuted. That would save a lot of taxes for those that live in concrete bunkers and get room service.

Might as well throw out roads, garbage, fire departments, police departments, and schools. They are no value either...particularly to criminals.

Added: Fines and Payments go to funding the Courts such as the Clerks Office, Record Keeping, Legal document processing, maintaining civil and criminal files, paying clerks, special program costs (pretrial diversion programs, drug diversion programs, probation officers, service of documents, passport processing, election monitoring, traffic records, small claims civil actions, document name a few.)

Retirement Accounts: Combination of salary reduction to the market coupled with taking a percentage from your pay like Social Security. Judges, prosecutors, court admin, support personnel, etc should not be volunteers since they are to assist the public in doing business. Most of society is incapable of controlling a criminal population on their own. There are some things that it just makes sense to pay for as a citizen. Not sure how the the people out West in the beginning of the country defended against a tribe of mad native americans in their front yard. Maybe the cavalry or the sheriff or some Judge did something to smooth the situation.,

There are rules, statutes and case law concerning "Prosecutorial Misconduct".

There are only rules of ethics for lawyers in general. Guess which are enforced between the two sets of standards.

Nov 19, 2015 - 3:55pm

On the other hand

Very nice explanatory post Cal.

However the short, simple answer is "the banks are selling something they don't have to someone who doesn't want it".

Nov 19, 2015 - 2:07am

You are paid by taxation

The judge is paid from taxation. The bailiff is paid from taxation. The prosecutor is paid by taxation. The appointed defense attorney is paid by taxation. The defendant is unpaid and losing wages for every moment they are dealing with the court and the accusation. The defendant is usually the tax payer and is funding his/her opposition. You take an oath to the state. The judge takes an oath to the state. The prosecutor takes an oath to the state. The rules/statutes are the States. The state writes down whatever statutes they want to burden the "citizens" with. The defense attorney takes an oath to the state. To be a member of the bar, you take an oath to uphold the state. Is everyone on one team against the defendant... I'm speaking of victimless crimes. Any fees or fines that they levy against you go towards the precious pensions of the state. Edit: I said bailiff twice. :)

Nov 18, 2015 - 4:39pm


It is fair as in our State the majority of criminal defendants are with insufficient funds or property to afford counsel. Counsel is appointed from an experienced group of Defense attorneys that serve on 3 year contracts subject to approval of the Court. All forensic tests are done centrally outside the supervision of the Courts and funded by the State. Mental testing is contracted and paid for by the State. If the Defendant wants a second opinion or additional testing, they submit a Motion to the Court and a pre trial hearing is held and if the Court orders the additional testing, funds are ordered by the Court paid by the State. In the case of Capital Murder, additional funding is authorized with at least 2 Defense Attorneys with a minimal of 5 years experience with lead counsel having prior capital experience and can be from anywhere in the State. Defense attorneys have access to entire case file and all State collected evidence.

Nov 18, 2015 - 10:39am

Sorry didn't mean to be hurtful

In general, the state has unlimited resources. I'm fairly certain you didn't have to personally pay for the subpoenas, DNA tests, police dogs (how does one cross examine a police dog?) used in your line of work. And while a wealthy person may choose to expend $50,000 on a retainer and a few hundred thousand more on 'experts' to prove themselves innocent (because that's what it amounts to) a poor person does not have this option and probably makes too much to qualify for a public defender, if they're working at all.

Their options are either:

  1. accept a plea bargain that automatically makes them a felon, disenfranchising them forever.
  2. proceed to trial with inadequate representation and discovery and even evidence because they certainly can't afford all those fancy tests and witnesses the state has.

Does that sound fair to you?

Nov 18, 2015 - 8:23am

17 down days in 18 trading sessions in Silver

When someone can continually sell 17 days in 18 trading sessions what he does not have, can we call still call this stuff a market?

This is a simple question to ask to the regulators.

Nov 18, 2015 - 12:25am



Nov 17, 2015 - 10:22pm


Not sure the issue. Figured out that the state must have unlimited resources... I assume you are referring to the State. I was on salary. I did murders and Capital cases. If I did traffic cases I got the same wage. Once I asked a defense attorney how much he got to defend a murder case that lasted 3 days where I had to put on all the evidence and witnesses, because the State has the burden of proof. He got $50,000 for a losing effort for a trial. I continued to work with hundreds of criminal actions to earn the equivalent over a more than 6 month period...not 3 days or 1 case. If paid equally as a representative of the State, I would be extremely wealthy. There are not unlimited resources or is there universal corruption.

Please write a specific question.

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Nov 17, 2015 - 9:55pm

Is it rigged

When the prosecutor has at his disposal infinite funds, and you whatever you don't want to leave to your survivors? Really? You have to ask? You don't think for a living, do you. There's a simple solution though. No law may be written that is more than a page in length. The sum and total of laws cannot exceed what one man can speak in a fortnight. Now every man can know the law and truly ignorance of the law is no excuse.

Texas Sandman
Nov 17, 2015 - 5:51pm

Banking cartel is the government...

or at the very least doing its bidding. That, in a nutshell explains why they get a free pass.

And Lois Lerner lives a very nice life on her IRS pension in a posh section of DC.

David Petraeus cops a plea and pays a big fine.

Dinesh D'Souza spends time at club fed on a peccadillo. His claims of selective prosecution fall on deaf ears.

Hillary Clinton runs for president.

And the world makes sense again in Chicago-land justice on a federal scale.

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