STAMFORD, Conn. -- A registered broker-dealer and former managing director at New York investment bank Jefferies & Co. Inc., which has a trading floor in Stamford, has been convicted of multiple offenses involving a scheme to defraud customers trading in residential mortgage-backed securities, according to a statement from the U.S. attorney in Connecticut.
A jury found that Jesse C. Litvak, 39, engaged in a scheme to defraud, based on two types of misrepresentations, the statement said.
First, as a broker-dealer, only Litvak – not the bond seller or buyer – knew the selling and asking prices of the parties. Litvak exploited this information by misrepresenting the RMBS seller’s asking price to the buyer and by misrepresenting the buyer’s asking price to the seller. Having fraudulently manufactured a gap, Litvak, on behalf of Jefferies, pocketed the difference in the price paid by the buyer and the price paid to the seller.
Second, Litvak took bonds held in Jefferies’ inventory and sold them to RMBS buyers after inventing a fictitious third-party seller. This ruse allowed Litvak to charge the buyer an extra commission that Jefferies was not entitled to because it was selling bonds it held in its own inventory.
Through these schemes, Litvak defrauded numerous public-private investment program funds and multiple private investment funds of a total of more than $2 million.
Litvak was found guilty of 10 counts of securities fraud, which carries a maximum prison term of 20 years on each count; one count of TARP fraud, which carries a maximum prison term of 10 years; and three counts of making false statements to the federal government, which carries a maximum term of imprisonment of five years on each count.
Litvak is scheduled to be sentenced May 30. He has been free on bond since his arrest Jan. 28, 2013.
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