Another Jury Finds Ex-Jefferies Group Trader Guilty of RMBS Fraud
A federal jury has convicted Jesse Litvak of one count of securities fraud. The ex-Jefferies Group LLC (JEF) bond trader was tried again on allegations that he bilked customers of $2M when he inflated the prices that he claimed he paid for residential mortgage-backed securities. As a result of his claims, professional investment managers and hedge funds paid too much for bonds.
Another jury had found Litvak guilty of fraud two years ago. However, in 20015, a federal appellate court dismissed parts of the RMBS fraud case against him. The securities fraud charges were retried before a new jury.
During this trial, prosecutors claimed that Litvak’s customers had totally relied on him for bond pricing information. His legal team, however, argued that his customers were sophisticated investors and did what they wanted regardless of his advice.
Since Litvak’s first criminal case, prosecutors have brought charges against other bond traders. Last month, a grand jury indicted ex-bond trader David Demos on multiple counts of securities fraud related to the allegedly fraudulent trading of RMBSs. Demos, a former Cantor Fitzgerald & Co. managing partner, is also accused of overstating what price the firm paid so that customers would pay more for the bonds. He pleaded not guilty.
Royal Bank of Scotland Designates $3.8B for MBS Fraud Case
Royal Bank of Scotland (RBS) has put aside at least $3.8B provision as it gets ready to settle mortgage-backed securities fraud claims in the US. Negotiations with the Justice Department are slated to get underway.
RBS is accused of mis-selling MBSs leading up to the 2008 financial crisis. The bank had previously already put $5.6B aside.
Earlier this month Credit Suisse (CS) arrived at a deal to pay $5.3B to settle MBS fraud charges brought by the US government. Deutsche Bank (DB) agreed to a $7.2B settlement in the mortgage-backed securities fraud case against it.
Judge Won’t Overturn Jury’s Muni Bond Fraud Ruling
A federal judge in Florida has denied the request of Miami’s ex-budget director to overturn a jury’s finding that he helped with $38M in improper transfers to enhance the city’s bond rating. Michael Boudreaux had argued that the evidence brought by the US Securities and Exchange Commission in its case against him was not sufficient and wrongly tied him to contentions that the Florida city had violated a cease and desist order before he worked for it.
The jury had found that Boudreaux and Miami hid facts and misled municipal bond fraud investors about the manipulation of up to $37.5M to hide issues with the city’s general operating fund. The Florida city and Boudreaux did not disclose the scam in yearly financial reports.
Mortgage bond trader Jesse Litvak convicted of fraud, again, Housing Wire, January 27, 2017
Former Jefferies Trader Litvak Sentenced to Two Years, The Wall Street Journal, July 23, 2014
Royal Bank of Scotland Sets Aside $3.8 Billion for Fines, ABCNews, January 26, 2017