Over the summer, the Department of Justice gave up its five-year pursuit of former Jefferies managing director and mortgage-backed securities trader Jesse Litvak, ending the DOJ’s effort to jail the trader for allegedly lying to customers about mortgage bond trades.
Litvak was originally charged in 2013 with 16 counts of defrauding customers on residential mortgage-backed securities trades by allegedly misrepresenting both the selling price and buying price of bonds.
In March 2014, Litvak was found guilty of lying to clients about mortgage-backed securities and received a two-year prison sentence, but Litvak fought the conviction successfully.
This summer, after seeing Litvak’s conviction overturned in the Court of Appeals for the second time, the DOJ abandoned its prosecution of Litvak.
And now, the Securities and Exchange Commission has done the same thing.
The SEC announced last week that it asked a judge to dismiss its claims against Litvak, a request that a judge granted last week.
According to the SEC, the criminal charges Litvak faced were based on the “same facts” that supported the SEC’s case. So with the DOJ giving up its case against Litvak, the SEC is choosing to end its pursuit of Litvak as well.
Litvak was one of the only people sent to jail for their conduct in and around the housing crisis.
As stated before, in 2014, Litvak was found guilty on 10 counts of securities fraud, one count of defrauding TARP, and four counts of making false statements within the jurisdiction of the United States government.
As a broker-dealer, Litvak dealt with both the bond sellers and bond buyers. In some cases, Jefferies would purchase the bond for a certain price, then sell it for more, thereby making a profit.
The government claimed that Litvak was dishonest with both sides of the deals, playing both to produce more profits than Jefferies deserved.
Litvak successfully fought that original sentence, with the Court of Appeals for the Second Circuit throwing out his conviction because he wasn’t allowed to bring expert witnesses to testify on his behalf.
But the government didn’t give up in its pursuit of Litvak, bringing 10 new charges against him and eventually securing a guilty verdict on just one count of fraud.
Litvak was sentenced to two years in jail for that one count, but appealed that decision, and was able to convince the Court of Appeals to overturn that conviction as well.
That second defeat led to the DOJ abandoning its case against Litvak, and the SEC has now followed suit.
