Former Jefferies Trader Wins Reversal of Fraud Conviction

8 Dec 2015 | Author: | No comments yet »

Federal Appeals Court Throws Out Case Against ex-Jefferies Group Bond Trader.

A former Jefferies & Co. managing director accused of lying to customers about bond prices had his fraud conviction overturned in the latest blow to the government’s effort to hold individuals accountable for alleged wrongdoing on Wall Street. Court of Appeals for the Second Circuit reversed trader Jesse Litvak’s conviction on charges of fraud against the U.S. and making false statements, saying the evidence prosecutors offered at trial “provided an insufficient basis for the jury to find that the defendant’s misstatements were material to the government.” The judicial panel also vacated Mr.

Justice Department and the Securities and Exchange Commission have been using Litvak as a model for building more securities fraud cases, people with knowledge of the probes have said. The reversal immediately threatens at least one criminal case — that of Matthew Katke, a former Royal Bank of Scotland trader of collateralized loan obligations who pleaded guilty in March to fraud and agreed to cooperate with prosecutors. Katke’s case brought to light a new strategy for investigators who are trying to clean up markets for the type of complex debt that helped cause the financial crisis, and showed how regulators are looking past the mortgage-backed securities at the heart of the meltdown. He was accused of defrauding investors of $2 million by misrepresenting how much sellers were asking for the securities or what customers would pay and keeping the difference for Jefferies.

Litvak didn’t dispute that he made misstatements, arguing at trial that they weren’t material and he didn’t think the other parties in the transactions would be harmed because he was selling the bonds at “fully disclosed and agreed upon fair prices” that stayed below Jefferies’ threshold for 4 percent profit.

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