A former trader and managing director at the investment bank Jefferies & Co. was arrested Monday after being charged with defrauding investors and the government in the sale of mortgage-backed securities.
Jesse Litvak, 38, is accused of inflating the cost of mortgage bonds when brokering sales by quoting a higher price to buyers than the sellers were actually seeking — or vice versa — and pocketing the difference for Jefferies (JEF). In other cases, Litvak allegedly told buyers that bonds held by Jefferies were being offered by fictitious third-party sellers, allowing him to charge extra for the transactions, federal officials said.
Among the buyers Litvak is accused of defrauding are several investment funds established by the Treasury Department in 2009 with the goal of reviving the market for mortgage bonds in the aftermath of the financial crisis. All told, Litvak is accused of defrauding the government and investors of more than $2 million.