What's up guys and welcome to wall street millennial on this channel, we cover all things: stocks and investing, and today we're going to go over one of the most blatant money grabs in recent american corporate history. Jp morgan chase, the biggest of the us megabanks by both assets and market cap, has risen to the top of wall street. Over more than a century. They didn't become the most successful investment in commercial bank in the world by sitting on their hands.

They have a proven track record of making their stakeholders fabulously wealthy in any economic environment. However, as is the case with all too many affluent wall street actors, there have been certain steps in their path towards financial riches that raise an eyebrow in this video. We'll go over one of the more recent instances of jpmorgan abusing its market dominance for its own good at the expense of the general population. Before we get into the video we'd like to thank our channel members channel members, get access to these videos one day in advance and get to vote on some of our video topics.

Jpmorgan is like a giant octopus with tentacles touching many industries across the globe. Thus, they have ample opportunities to practice some level of manipulation in many markets. One such example of this is their manipulation of energy prices, which cost consumers more than 100 million dollars between 2010 and 2012.. It is a common practice for utility companies to purchase electricity at wholesale prices from electricity producers such as power plants, jp morgan established a subsidiary called jpmorgan ventures.

Energy corporation. This company acted as a middle man, purchasing electricity from power plants and selling it to utility companies. Utilities purchase the energy at competitive auctions from whoever sells it at the cheapest price. They then charge end utility customers, a retail rate, which is usually some markup over the wholesale rate.

The utility company paid jp morgan found a way to manipulate the competitive bidding, profits and bag huge profits for themselves. They were able to pull it off by taking advantage of some technicalities in california, electricity laws in california. If a utility company accepts a bid for some amount of electricity but later reneges on it, they have to pay a fee to the electricity provider as compensation for the cost of putting together the bid. The purpose of this law is to allow electricity providers to avoid wasting money if the utility doesn't end up using them.

Jp morgan found a loophole that allowed them to exploit this regulation. They would make a low ball bid to the utility that the utility would surely accept after the utility approved the bid they hiked the price dramatically, so the utility will renege and go with a different bid. When this happens, the utility company has to pay the fee to jp morgan. The utility company then almost always passes the majority of the expense of those fees to the end consumer by increasing their electricity bills between 2010 and 2012.

Jp morgan's bidding gimmick cost california residents 124 million dollars in higher electricity tariffs. They employed similar tactics in some midwestern areas on a smaller scale, extracting an additional 1 million dollars of ill-gotten gains. In 2013, the federal energy regulatory commission found out about jv mortgage manipulation and they were forced to settle the case for 410 million dollars. This included reimbursements to the customers impacted by higher prices, as well as a fine.

So what actually happened, and how did jp morgan get caught according to correspondences, that we found between the chairman of the federal energy regulatory commission and u.s senators, elizabeth warren and edward markey jp morgan actually had 12 distinct strategies for defrauding utility companies. The senator is right. According to your investigators, shortly following j.p morgan's acquisition of california and michigan power plants in 2008, the plants started losing money. At that point, the bank adopted 12 different schemes to offer electricity at prices quo calculated to appear falsely attractive.

Unquote, these manipulations, reportedly transformed quote money losing power plants into powerful profit, centers unquote, while costing state authorities tens of millions of dollars in direct losses. The ripple effects of price manipulation may have cost consumers many times that amount. Additionally, after the manipulations were found out and being investigated, jp morgan actively and deliberately engaged in a cover-up and attempted to hamper the ferc's investigation. According to the ferc in 2012, the megabank refused to comply with subpoenas and even engaged in a cover-up of documents.

That would implicate the bank, among other things, they rewrote internal documents that question the legality of their actions. It is possible that jp morgan even evaded a six-month suspension from the california electricity markets imposed by the ferc by granting its rights to the market to two other independent firms, any possible connection between jp morgan and these two firms is unknown. However, once the investigation got rolling, it was only a matter of time before jp morgan had to pay up for its crimes. On july 30 2013 the ferc put out a press release announcing that jp morgan had agreed to pay nearly half a billion dollars in total penalties and damages to electricity market consumers.

The agreement stipulated that the bank would pay a total of 285 million dollars to the treasury of the united states as a civil penalty and pay 125 million dollars in damages to electricity consumers to pay back for unjust profits. The ferc disclosed that both the california electricity regulator, known as the california independent system operator and the mid-continent independent system operator, had independently filed complaints with the ferc regarding jpmorgan's market manipulation. The nature of jpmorgan's 12 strategies was to make bids that looked too good. To be true for utility companies then used technicalities in the law to extort the utility companies once they signed contracts with the bank.

This had the effect of deliberately defrauding the utility companies while at the same time distorting market prices and electricity for consumers after the settlement. It was also reported by various newspapers that the fbi was getting involved. In the case, they were interested in jp morgan's alleged obstruction of justice during the ferc investigation. In addition, the u.s attorney's office in manhattan also investigated employees of jpmorgan for withholding information and making false statements during the investigation.

These investigations were the result of elizabeth warren and edward markey, asking the ferc why there had not been any action taken against the executives at j.p morgan who impeded the ferc's investigations. This was from the same letter that we saw before that they sent to the chairman of the ferc. At one point, there were over a dozen investigations by various agencies against jp morgan for the obstruction of justice. However, nothing ever came out of any of them, and jp morgan's settlement with the ferc was the only punishment they ever got.

In the end, 410 million dollars of fines that jp morgan paid, including 285 million dollars in penalties to the u.s treasury, amounted no more than a drop in the bucket for the behemoth that is jp morgan in the quarter that the settlement with the ferc was reached. Jpmorgan made 57 and a half billion dollars in revenue approximately 150 times the amount of the fine in the most recent quarter. At the time of the settlement, jp morgan reported making six and a half billion dollars of net income, which is more than 20 times the amount of the 285 million dollar penalty that they had to pay for the scandal divided out throughout the quarter. That means that they may back the amount of the penalty in less than three business days.

Given that perspective on the magnitude of the fine to a giant like jv morgan, it's no surprise that jp morgan, along with several of its other wall street peers, continue to engage in market manipulative behavior, as they have done for decades. For example, goldman sachs engaged in an even more blatant market manipulation scheme around the same time as the jp morgan energy market, manipulation. Scandal except goldman, did it in the aluminum markets. If you haven't seen our video on that topic check it out, the link is in the description below, but even within jp morgan's history, manipulating markets and otherwise abusing their power is nothing new.

For example, at the height of the dot-com bubble, jp morgan engaged in fraudulently pumping up tech stock prices by disseminating overly exuberant research pieces to hedge funds and other investment advisor clients. They would then extort the same companies whose stocks they were pumping up into using jp morgan as their main investment bank underwriting ipos bond offerings and other corporate actions separately. Jp morgan directly enabled the enron fraud and also profited from the world com fraud, which both happened in the early 2000s. But perhaps one of the most gut-wrenching frauds that they committed was in the late 2000s.

When jp morgan overcharged thousands of military and active duty personnel, including soldiers in afghanistan, the bank admitted that he illegally foreclosed on military families a clear violation of the service member civil relief act, which bars foreclosure proceedings of active duty personnel. In 2011, ceo jamie dimon explicitly apologized for illegally overcharging the military personnel claiming that the bank charging more than appropriate, was an accident whether or not overcharging, unsophisticated customers is an explicit strategy at jpmorgan to boost profits is not entirely clear. What is clear, however, is that jp, morgan's track record of doing right by the letter and the spirit of the law is riddled with blemishes. Alright guys that wraps it up for this video, if you like the content, make sure to smash that like button and subscribe for future content, also, don't forget to check us out on our second channel wsm research, where we post dd on high growth songs.

In the meantime, thank you so much for watching and we'll see in the next video wall street millennial signing out.