November 4, 2011 / 6:55 PM / 9 years ago

UPDATE 1-CFTC issues update on long-running silver probe

* CFTC: Silver probe continues in appropriate manner

* Chilton believes violations of law in silver markets (Recasts, adds details and background)

NEW YORK/WASHINGTON, Nov 4 (Reuters) - The U.S. futures regulator said on Friday it continues to investigate possible unlawful acts or manipulation in silver markets, in a probe that began more than three years ago.

The Commodity Futures Trading Commission said in a brief statement it has analyzed more than 100,000 documents in its investigation, interviewed dozens of witnesses, and obtained expert advice since the start of the probe in September 2008.

“It has been a long, detailed, and thorough investigation, and it continues in an appropriate and considered manner,” the agency said in its one-paragraph statement.

The CFTC did not say specifically why it issued the update.

On Friday, CFTC Commissioner Bart Chilton was quoted by a gold advocacy web site as saying he believed there have been violations to the Commodity Exchange Act in the silver market. (Chilton's online interview:

Chilton, known as an outspoken proponent of regulation to protect investors and consumers, has in the past said that he believed there had been “fraudulent efforts to persuade and deviously control” silver prices.

In October of last year, JPMorgan Chase & Co (JPM.N) and HSBC Holdings Plc (HSBA.L) were hit with two lawsuits by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars of illegal profits. [ID:nN27259071]

HSBC has since then been dropped from one investor lawsuit, leaving JPMorgan as the only bank defendant in that case. [ID:nS1E78D216]

Federal regulators and aggrieved investors have faced an uphill battle to prove allegations that some of the biggest silver trading firms are manipulating the market, if history is any guide. [ID:nN01210936]

Silver has featured prominently in modern commodity market scandals. In the most memorable case, the Hunt brothers of Texas hoarded the precious metal, aiming to corner the market and control global prices starting in the late 1970s.

A more recent comparison was the case between Barrick Gold Corp (ABX.TO), one of the world’s largest gold miners, and bullion and coin dealer Blanchard & Co, which accused Barrick of manipulating the gold price in league with JPMorgan Chase. Barrick and Blanchard settled the lawsuits they brought against each other in 2005. (Reporting by Frank Tang in New York and Roberta Rampton in Washington; editing by Andrea Evans)

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