Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, January 28, 2013

SEC Charges Former Jefferies Trader with Defrauding Purchasers of MBS

The SEC charged Jesse Litvak, a former broker at Jefferies & Co., with defrauding investors while selling mortgage-backed securities (MBS) in the wake of the financial crisis so he could generate additional revenue for his firm.  The U.S. Attorney’s Office for the District of Connecticut also announced criminal charges against Litvak.

According to the SEC’s complaint, in the course of his job performance as a managing director on the MBS desk at Jefferies,  Litvak would buy a MBS from one customer and sell it to another customer.  On many occasions he would lie about the price at which his firm had bought the MBS so he could re-sell it to the other customer at a higher price; on other occasions, he would mislead purchasers by creating a fictional seller to purport that he was arranging a MBS trade between customers.  The SEC alleges that Litvak generated more than $2.7 million in additional revenue for Jefferies through his deceit. 

According to the SEC’s complaint, Litvak worked in the Stamford, Conn., office at Jefferies, and his misconduct lasted from 2009 to 2011.  Litvak’s customers included some funds created by the U.S. government under a program designed to help strengthen the markets for MBS during the financial crisis.

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