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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