Thursday, January 31, 2013

Crooks: Ex-Jefferies Arrest Shows Market Lacking Transparency




Jesse Litvak, a former Jefferies & Co. mortgage-bond trader, is accused of cheating customers by using unscrupulous sales tactics that the U.S. Securities and Exchange Commission’s deputy director of enforcement called “unfit for a used car lot.” Such practices are widespread in a market lacking transparency, investors and regulators told Bloomberg’s Best.

Litvak was arrested Jan. 28 and charged by the U.S. Attorney’s Office in Connecticut with defrauding firms, including BlackRock Inc., AllianceBernstein Holding LP  and Magnetar Capital LLC, out of more than $2 million by allegedly lying about the origins and prices of securities. Some of the trades involved a federally subsidized program to revive the mortgage-bond market after it froze in 2008. Litvak, 38, pleaded not guilty.

The case shows how even Wall Street’s most sophisticated mortgage investors remain largely at the mercy of middlemen a decade after regulators forced brokers of other types of bonds to publish data…


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