"Cowboy Of Wall Street" Gets Two Years In Prison For Bond Price-Rigging After All

Tyler Durden's picture

Remember Jesse Litvak?

He was the Jefferies MBS bond trader who was the first to get busted in January 2013 for rampant skimming off the bid and ask when trading with clients. We first profiled him over four years ago, and in that period he has repeatedly made headline news, most recently in January when Litvak was initially found guilty at a trial although on just one of 10 counts, after his first conviction was reversed on appeal. Well, moments ago Litvak made headlines again when learned his new punishment, and as Bloomberg reports he was disappointed: it two years behind bars and a $2 million fine for lying to a customer about bond prices.  His main transgression: fabricating bid/ask prices when talking to clients seeking to trade mortgage-backed bonds with him, in addition to "bending the truth or even falsifying chat transcripts in order to maximize his earnings."

As Bloomberg writes, "Litvak’s arrest in January 2013 marked the onset of a crackdown on shady sales practices in the opaque world of securities backed by assets such as home loans. The probe has led to charges against at least seven other traders and the departure of nearly two dozen. Three former traders at Nomura Securities go on trial next week."

"These were the cowboys of Wall Street," said Peter Henning, a law professor at Wayne State University in Detroit. "If you were a bond trader, you could almost do anything you wanted, and not anymore."

Indeed: this is in line with what we predicted back in January 2013 when we said that "the days of rampant skimming on top of the bid/ask spread, and with them record bonuses for bond traders and salesmen, may just ended with a whimper not a bang, and all bond traders hoping to make millions by misrepresenting what the true purchase or sale prices are to buysider clients, even if completely voluntary on both sides, may want to seek employment elsewhere. They have Jesse Litvak to thank for it."

For those unfamiliar with Litvak's colorful history, here is a brief reminder from Bloomberg:

Litvak was initially convicted of 15 counts of securities fraud during his first trial in 2014 and ordered to spend two years in prison and pay a $1.75 million fine. An appeals court reversed the conviction and sent the case back for another trial, saying that he should have been allowed to present evidence from his own expert that misrepresentations between financial professionals were common.


After his second conviction, Litvak’s lawyers asked U.S. District Judge Janet C. Hall to sentence him to a pay a fine plus eight months of confinement at his home in Boca Raton, Florida, where his wife  has a dental practice. They said the circumstances surrounding his conviction have changed "dramatically," given he is only facing punishment for one count instead of 15. They also argued that the government has handled similar bond-trading infractions via regulatory sanctions and fines, rather than criminal prosecutions.

"We come before your honor with different circumstances that compel a different result,” Dane Butswinkas, one of Litvak’s attorneys, told Hall on Wednesday. “The different outcome is a factor. The other resolutions of cases that are similar is a factor."

Prosecutors disagreed, and instead demanded a harsher punishment than what Litvak received the first time, saying he showed no remorse, blamed one of his alleged victims and criticized the jury that convicted him. Federal guidelines called for a sentence of 9 to 11 years, they said. Litvak had "every advantage in life" and his career gave him "wealth beyond the dreams of most Americans," along with a multimillion dollar apartment on Manhattan’s Upper East Side and a "luxurious" six-bedroom vacation home in New York’s Hamptons, according to prosecuters’ court filings.

On Wednesday, Judge Hall said a key witness’s testimony about Litvak’s tactics was “very compelling.” He “regularly and repeatedly” misrepresented prices, she said.

The investors were harmed because they paid more money to Jefferies and more likely more than they would have paid if Mr. Litvak hadn’t lied,” Hall said. Hall last week rejected Litvak’s request to throw out his latest conviction. He will have to look to a federal appeals court in Manhattan if he hopes to avoid prison.

* * *

Why is a big deal being made out of this case? Simple: there are many in the same boat as Litvak. As Bloomberg concludes, The case has been closely monitored by bond traders, especially others who have been charged in the crackdown on deceptive sales tactics.

Next week jury selection is set to begin about an hour to the north, in Hartford, in the trial of three former Nomura Holdings Inc. traders. Ross Shapiro, Tyler Peters and Michael Gramins are accused of similar conduct. A former Cantor Fitzgerald & Co. mortgage-bond trader, David Demos, was indicted in December on fraud charges for allegedly lying to customers.

* * *

As for Litvak, third time may be the charm: "while prosecutors in the Litvak case proved their case to the jury, Henning said it "wasn’t the wide ranging fraud it was first touted as" and may get another close look from a federal appeals court."

"The government achieved one important thing with its prosecution" of Litvak, Henning said, "sending a message to financial firms to be more careful. Firms have put a much greater emphasis on compliance, even in dealing with sophisticated clients."

What he really meant is that the message sent by the government was far simpler: break any and all laws - as Wall Street continues doing to this day, just look at Deutsche Bank - but don't get caught."

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jcaz's picture

LOL- only 2 years and $2M?  Just the cost of doing biz- he'll spend his vacation counting his money......

knukles's picture

"Said the law prof from Wayne State University"
              Talking Heads

And yet, as a man of law, why would he not question the Fed's practices of abusing the power to make something from nothing, to print fiat money.

Jim Sampson's picture

I bet his cell is still better than where I live.

Scanderbeg's picture

He will probably get tennis and a conjugal muff dive every Tuesday.


A. Boaty's picture

Small fry. Wake me when they put real banksters in jail.

coast1's picture

thats what I was going to say...he is a fall guy that they make us believe there is some law in town...what a joke huh?

Jim Sampson's picture

TPTB:  "Alright...  we need a fall guy.  You'll do 2 years, 2M but you'll be in an all inclusive resort."


Johnson: "Eh...  I kinda want to get away from my wife for a bit, I'm down!"

Bernie Madolf's picture

Sorry, if you're buying securitized investments then the due diligence is on the buyer.

Any seller is obviously going to overstate the price.

This guy may be a schmuck but he didn't force anyone to buy his poop

Bernie Madolf's picture

Maybe ole yeller and friends should be liable for forcing investors to chase returns and buy poop

Blankenstein's picture

Watch this one, it might get overturned again on some bullshit technicality, just like the huge municipal bond rigging scandal that got minimal coverage outside of a few sources. 


"A federal appeals court said the U.S. government had waited too long to prosecute three formerGeneral Electric Co bankers for conspiring to defraud cities in a municipal bond bid rigging scheme, and ordered the case to be dismissed.


Monday's ruling by a panel of the 2nd U.S. Circuit Court of Appeals in New York was issued 13 days after the court reversed the May 2012 convictions of the three bankers.


The 2-1 decision, which a dissenting judge called "misguided," is a setback for government efforts to patrol the $3.7 trillion municipal bond market, including when cities and towns might be facing financial harm long after the purported corruption took place."



"How America's biggest banks took part in a nationwide bid-rigging conspiracy - until they were caught on tape"




vegas's picture

So, it's Ok for the members of the Fed to lie to the American people about interest rates, all the while stealing the interest of the baby boomers, and guys like Corzine walk around free after hijacking almost 2 large from MF Global, but this guy goes to jail for "misrepresenting fucking bond price quotes? WTF



Dragon HAwk's picture

One Bullet to the head by an angry Customer, usually solves those  kinds of problems,

but i guess people hate to get those Silk Ties messy.

Beans's picture

Sweet jesus, a Jew's been jailed for financial crimes??!!! Heimies throwing out a sacrificial lamb must mean they're really starting to feel the heat. 

barysenter's picture

The "You can't convict my client judge, everybody's doing it." defense is all used up.

aliens is here's picture

He must be on the bottom of the food chain in wall street. If he is a big bank CEO he would have walked.

DuneCreature's picture

This Litvak bust and sentence is token horseshit.

~~~~ )))) Who In The World Is Driving This Bus? (((( ~~~~

Who knows what to believe from our bankster overlords and the MSM they control.

For example, this from:
The senor legal consul for 20 years at The World Bank who asserts that:

i) There is 170,000 tons of gold in Bank of Hawaii (at 27.30)
ii) That 60% of IRS tax revenues go to the Vatican after a bankster skim (at 16:30)
iii) There are 'loose nukes' floating all over the planet. (about 29:30)
iv) The banksters sell you into a lifetime of slavery at birth.(at 22:40)

And plenty more crazy assertions and details...

Drug induced hallucinations? ... Perhaps. =

A bankster lawyer tells you that crazy stuff...........Then one of the banksters spills his guts and tells you things like this:

An interview with a Dutch currency trader Ronald Bernard at the top of the pyramid. (About 10,000 assholes)


(Warning spoken Dutch with English sub titles)
Listen (watch) to it all, about 40 minutes for the dark heart of the matter in detail. = https://vimeo.com/212237317

Or this next banker dude trying to do the right thing and getting locked up instead.

Brad Birkenfeld is a real whistleblower 'good guy'. =

Stuff you will never see on CNBC.

And then the banksters say, "Trust us, we are the banker class with all the integrity you could ever want to see. ... Here are the facts. Here are the numbers. .. Don't you insult us by questioning what we tell you either. .. After all, we wear three piece suits and have very fat bank accounts (full of stolen loot). ... Oh, and we're the Fed and everything we do is a big secret."

I don't know about you, (and I'm a business man in scruffy jeans) but every time I encounter some Bozo in a three piece suit and he starts to spew, it takes him about three and a half minutes and he's on my 'to do' list. .... Or if he's only mildly irritating and not totally oozing evil he's on my 'NOT to have anything to do with' list instead of my 'to do' list.

I think Clif High has nailed it:

"These people (TPTB) are wackos. .. They're batshit. ..They're crazy. They don't behave like normal regular humans. People at the top are pedophiles. .. Many of them are being blackmailed. ........Probably most of them at the top are constantly stoned out of their minds on bazaar drugs we've never even heard of. ... And that's our world." ~ Clif High at halfpasthuman.com

The rich thieving is not new news. .. Max Kaiser, Matt Taibbi, Greg Hunter, Perkins, Corbett, and dozens of very competent reporters and investigators have been telling us about the stealing and lack of SEC/DoJ prosecutions for years

BUT recently.............

The rich are getting more delusional by the minute. .... This is going to end badly for everyone. ... The wealthy included. ... The banksters better up armor their limos and make sure those secret bunkers are well hidden.

Live Hard, We Have Crazy, Rich, Blackmailed, Drug Addicts, With Guns Calling Themselves 'The Good Guys' Running The Planet Earth, Die Free

~ DC v5.0

Snaffew's picture

if this was a black man who stole $300, he would probably get 10 years.  Whiteys are exempt from the law.

Chippewa Partners's picture

The guy is a piker. The boys on Milkens junk floor were making a million a month with huuuuge bonus's in mid-80's!