Jury Finds One Former Nomura Trader Guilty, Acquits Another in RMBS Fraud Case

A jury has found Michael Gramins guilty of conspiracy to lie about mortgage bond prices. Gramins was one of three ex-Nomura (NMR) residential mortgage-backed securities traders charged with fraud and accused of defrauding clients of millions of dollars.

Aside from the guilty RMBS fraud verdict for conspiracy, Gramins was found not guilty of six fraud counts. The jury did not arrive at a verdict on two other charges against him.

Meantime, ex-Nomura trader Tyler Peters was acquitted on all of the criminal fraud charges against him. Although jurors cleared former Nomura trader Ross Shapiro of eight fraud counts, they were unable to arrive at a verdict regarding one conspiracy count against him. It wll be up to prosecutors to decide whether they want to retry Gramins and Shapiro on the counts that were not resolved.

The US Justice Department accused the three men of committing residential mortgage-backed securities fraud from about 2009 to 2014 to increase their compensation. At the criminal trial, some of their victims testified about how their decision to sell or buy mortgage bonds was impacted by the information given to them by the ex-Nomura traders. Three ex-junior traders also testified. They admitted to lying to their clients by using approaches that the defendants had shown them.

The US government has been investigating bond fraud in the $10 trillion US structured finance market. Already, Bloomberg reports, a number of those under investigation have arrived at deals with prosecutors, including former Nomura VP Frank DiNucci Jr. and two ex-Royal Bank of Scotland Group (RBS) traders.

DuNucci, who was a witness for the government in this case against the three ex-Nomura traders, pleaded guilty earlier this year to conspiracy to commit securities fraud. He also pleaded guilty to similar federal charges in New York related to misrepresentations he made involving another firm.

Last month, the US Securities and Exchange Commission sued two former Nomura Holdings Inc. traders who headed up the commercial mortgage-backed securities desk. Kee Chan and James Im are accused of lying about bond prices to clients in order to enhance their compensation as well as to inflate Nomura’s profits. The SEC said that the former traders made an extra $750K for the trading desk.

Although Chan settled the charges by agreeing to pay over $200K in penalties, as well as consenting to an industry bar, he did not deny or admit to any of the regulators findings. The Commission’s case against Im is ongoing.

In another unrelated mortgage bond fraud probe, ex-Visium Asset Management analyst Stefan Lumiere is sentenced to eighteen months in prison. Lumiere, who was convicted earlier this year of securities fraud, inflated bond prices at his firm’s credit fund by millions of dollars in an effort to conceal losses from investors. US district Judge Jed Rakoff also fined Lumiere $1M.

A probe into the allegedly fraudulently activities of Lumiere and others at Visium began after a junior credit trader became anxious about the mismarking scam and agreed to work as an informant for the government. Lumiere was the only one charged who decided to fight the securities fraud case against him.

Former Visium portfolio manager Sanjay Valvani committed suicide following his arrest. Christopher Plaford, who was Lumiere’s supervisor, pleaded guilty.

At The SSEK Partners Group, our securities fraud lawyers work with investors throughout the US, as well as investors wishing to bring securities claims against US-based brokerage firms in this country. Contact one of RMBS fraud attorneys today.

Former Nomura RMBS trader found guilty of securities, wire fraud conspiracy, Housing Wire, June 15, 2017

Ex-Nomura Head Traders Charged With Securities Fraud, Institutional Investor Securities Blog, May 18, 2017
Ex-Visium Fund Manager Sentenced to 18 Months After Fraud Conviction, US News, June 14, 2017