Trader gets two years for TARP fraud(Jul 23 2014)

박재훈투영인

created At: 2/7/2025

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133690

Mirae Asset TIGER NASDAQ100 ETF

Fact

Jesse Litvak sentenced to 2 years in prison and $1.75M fine First person charged under 2009 TARP fraud law Convicted on 15 counts including securities fraud Defrauded investors through TARP program 2009-2011 Generated over $2M for Jefferies through fraud Jefferies paid $25M to settle related probes Prosecutors sought 9-year sentence and $5M fine Defense requested maximum 14-month sentence

Opinion

The case reveals troubling aspects of Wall Street's culture. The judge's comment that lying might be commonplace suggests systemic ethical problems beyond individual bad actors. Most concerning is how a government program designed to stabilize markets after the financial crisis became another vehicle for fraud, indicating that increased regulation may not effectively address underlying cultural issues in the financial industry. The relatively light sentence compared to prosecutors' request could further reinforce the perception that financial crimes receive lenient treatment.

Core Sell Point

The exploitation of a crisis-era government program for personal profit, combined with suggestions of widespread unethical behavior and relatively mild punishment, indicates persistent cultural problems in the financial industry that could lead to future market abuses and crises.

A former Jefferies Group managing director convicted of defrauding investors who traded mortgage bonds through a government program established after the 2008 financial crisis was sentenced on Wednesday to two years in prison.
Jesse Litvak, 39, was convicted on March 7 on all 15 counts, including 10 counts of securities fraud and one count of fraud under the federal bailout known as the Troubled Asset Relief Program (TARP).

Litvak was the first person charged under a 2009 law banning major fraud against the United States through TARP.

Litvak, a married father of two, was sentenced by Chief Judge Janet Hall of the U.S. District Court in New Haven, Connecticut, who presided over his jury trial. Hall also fined him $1.75 million.

“I do not view you as singled out,″ the judge told Litvak before pronouncing sentence. “You lied. Maybe that’s what people do every day on Wall Street, but that still doesn’t make it legal.″⁣

Litvak’s conviction was seen as a boost for the U.S. Department of Justice, which has been criticized for not prosecuting enough people on Wall Street over misconduct before, during and after the financial crisis.

Prosecutors had accused Litvak of lying to customers such as AllianceBernstein Holding about the prices of mortgage-backed securities from 2009 to 2011, generating more than $2 million for Jefferies and boosting his own pay prospects.
Litvak allegedly deceived customers by inflating prices, concealing what Jefferies paid for bonds, and inventing sellers.

Prosecutors said cheated investors included participants in the Public-Private Investment Program, a TARP initiative designed to restart the mortgage debt market.

Litvak countered that his customers were professional investors who could tell whether prices were fair, and that his activities were commonplace in the industry.

Prosecutors asked for a nine-year sentence for Litvak and a $5 million fine. Litvak’s lawyers sought a term of no more than 14 months.

Jefferies, a unit of Leucadia National, agreed on March 12 to enter a nonprosecution agreement and pay $25 million to settle criminal and civil probes into its alleged failure to supervise Litvak and other traders.

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