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SEC Dismisses All Charges Against Former Jefferies MBS Trader

December 18, 2018

[Photo by Patrick McMullan / WSJ]


by Howard Haykin


Despite his two convictions, this individual persevered and won reversals on both. Now, with the SEC's motion to dismiss, the individual's 'nightmare' appears to be finally ended - at least in the judicial system. Our congratulations to Mr. Litvak.


On December 6, the U.S. District Court based in Connecticut dismissed with prejudice the SEC’s complaint against Jesse Litvak, a former managing director on Jefferies' mortgage-backed securities (“MBS”) desk in Stamford, CT. The court's order was based on the SEC's motion to dismiss its claims against Litvak.


In 2013, the SEC alleged that Mr. Litvak had lied to, or otherwise misled, his customers about the securities prices (and his firm’s compensation for arranging trades) on numerous MBS purchases and sales from 2009 to 2011. The SEC further alleged that, on some occasions, Litvak also misled his customer into believing that he was arranging a MBS trade between customers, when Litvak really was selling the MBS out of Jefferies' inventory. The customers included investment funds established by the U.S. government in the wake of the financial crisis to help support the market for MBS as well as other investment funds, including hedge funds. [See SEC 1/29/13 Litigation Release.]


Litvak was twice convicted, in jury trials in March 2014 and January 2017, but those convictions were both overturned by the U.S. Court of Appeals for the Second Circuit, most recently in May 2018.  In July 2018 the U.S. Attorney moved to dismiss its criminal case against Litvak and the court granted the motion to dismiss on August 1, 2018.