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Former RMBS Trader Found Guilty in TARP Fraud Case

Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP) announced in a press release Friday that a federal jury in New Haven, Connecticut has convicted Jesse C. Litvak, a registered broker-dealer and former managing director at New York investment bank Jefferies & Co., Inc., of multiple offenses involving schemes to defraud customers trading in residential mortgage-based securities (RMBS).

Litvak was convicted on all counts, including ten counts of securities fraud, one count of defrauding TARP, and four counts of making false statements.

"This afternoon, Jesse Litvak, a former senior trader at New York investment bank Jefferies & Co., was convicted of lying through his teeth to defraud American taxpayers out of their hard-earned TARP investments," Romero said.

Romero continued, "Trading in mortgage securities can be a complicated business, but what the defendant did was simple—he lied to, defrauded, and illegally overcharged customers out of pure greed to benefit Jefferies and himself."

Litvak, as a broker-dealer, misrepresented the RMBS seller's asking price to the buyer, and subsequently misrepresented the buyer's asking price to the seller. By creating a gap that did not exist, Litvak, on behalf of Jefferies, pocketed the difference.

Additionally, 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," the release said.

Litvak reportedly defrauded numerous funds for a total of more than $2 million.

The release noted, "Litvak was found guilty of ten counts of securities fraud, a charge that carries a maximum term of imprisonment of 20 years on each count, one count of TARP fraud, which carries a maximum term of imprisonment of 10 years, and three counts of making false statements to the federal government, a charge that carries a maximum term of imprisonment of five years on each count."

About Author: Colin Robins

Colin Robins is the online editor for DSNews.com. He holds a Bachelor of Arts from Texas A&M University and a Master of Arts from the University of Texas, Dallas. Additionally, he contributes to the MReport, DS News' sister site.

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