Ex-Jefferies trader gets two years in prison in fraud case

Reuters

Published Jul 23, 2014 03:21PM ET

Updated Jul 23, 2014 04:20PM ET

Ex-Jefferies trader gets two years in prison in fraud case

By Jonathan Stempel NEW HAVEN Conn. (Reuters) - A former Jefferies Group Inc managing director convicted of defrauding investors who traded mortgage bonds through a government program established after the 2008 financial crisis was sentenced on Wednesday to two years in prison.

Jesse Litvak, 39, was convicted on March 7 on all 15 counts, including 10 counts of securities fraud and one count of fraud under the federal bailout known as the Troubled Asset Relief Program (TARP).

Litvak was the first person charged under a 2009 law banning major fraud against the United States through TARP.

Litvak, a married father of two, was sentenced by Chief Judge Janet Hall of the U.S. District Court in New Haven, Connecticut, who presided over his jury trial. Hall also fined him $1.75 million.

"I do not view you as singled out," the judge told Litvak before pronouncing sentence. "You lied. Maybe that's what people do every day on Wall Street, but that still doesn't make it legal."

Litvak's conviction was seen as a boost for the U.S. Department of Justice, which has been criticized for not prosecuting enough people on Wall Street over misconduct before, during and after the financial crisis.

Prosecutors had accused Litvak of lying to customers such as AllianceBernstein Holding LP about the prices of mortgage-backed securities from 2009 to 2011, generating more than $2 million for Jefferies and boosting his own pay prospects.

Litvak allegedly deceived customers by inflating prices, concealing what Jefferies paid for bonds, and inventing sellers.

Prosecutors said cheated investors included participants in the Public-Private Investment Program, a TARP initiative designed to restart the mortgage debt market.