Investment Banker Receives 2-Year Jail Sentence, $1.75 Million Fine

A registered broker-dealer and former managing director at a New York investment bank that has an office in Stamford, was sentenced to two years in jail and ordered to pay a $1.75 million fine on Wednesday.

Chief U.S. District Judge Janet C. Hall in New Haven sentenced Jessie Litvak of New York to 24 months of imprisonment, followed by three years of supervised release, for defrauding customers trading in residential mortgage-backed securities (RMBS).  Litvak was also ordered to pay a fine of $1.75 million in connection to the fraud committed while he worked for Jefferies & Co., Inc. 

“For nearly three years, Jesse Litvak lied over 70 times to numerous Jefferies’ customers, cheating them and stealing their investors’ money,” U.S. Attorney Deirdre Daly said in a statement.

On March 7, 2014, a jury found Litvak guilty of 10 counts of securities fraud, one count of TARP fraud, and four counts of making false statements to the federal government.

Litvak, 39, was a senior trader and managing director at Jefferies, a global securities and investment banking firm headquartered in New York. Jefferies also had a trading floor in Stamford, where Litvak and other members of its Mortgage and Asset-Backed Securities trading group worked.  Between February 2009 and October 2011, Litvak engaged in a scheme to defraud Jefferies’ customers, according to prosecutors.

“While Litvak was being paid millions as a trader and managing director, he defrauded dozens of victims resulting in over $6 million in loss to investors," according to Daly. "The victim investors included pension funds for teachers, firefighters, police officers, and other state or municipal employees, as well as taxpayer-provided bailout funds that helped our nation to recover from the 2008 financial meltdown. This sentence serves as a warning bell to those who risk engaging in such corrupt practices.  We hope that this prosecution will act as a forceful disincentive to market participants tempted to commit securities fraud.  We commend SIGTARP and the FBI for their outstanding work on this investigation.”

Special Inspector General for TARP (SIGTARP) Christy Romero said, “Today’s sentencing sends a clear message that lying in the already opaque markets of mortgage backed securities to drive up prices for the sake of profits is a crime that will result in years in federal prison."  Romero also said, “When caught by a customer trading with taxpayer bailout dollars, senior bond trader Litvak said it was a ‘hard year’ and ‘guys were doing what they needed to make money.’ "

According to Romero, "Litvak bragged in online chats about lying to customers and driving up prices, conduct that ultimately resulted in $6.3 million in fraudulent profits for his firm, Jefferies.  Litvak knew full-well that some of those customers were funds filled with taxpayer dollars, and he has zero remorse for ripping off those customers and jeopardizing the integrity of the bailout program, all for the sake of pure greed.  I want to thank U.S. Attorney Deirdre Daly for standing united with SIGTARP in the fight against bailout-related crime.”

Earlier this year, Jefferies agreed to pay $25 million to settle civil damages after fraudulent schemes were launched in its Stamford offices.