(Bloomberg) -- A second appeals court win for former Jefferies Group LLC managing director Jesse Litvak -- a ruling that landed just an hour before a jury in Connecticut acquitted former Cantor Fitzgerald LP trader David Demos of similar allegations of cheating -- has changed the landscape in a federal attack on illegal sales practices in the opaque world of securities backed by assets such as home mortgages. Litvak was the first of more than a half-dozen bond traders charged by U.S. authorities with fraud for lying to clients.
Here’s a bank-by-bank look at their cases:
- Jesse Litvak
A federal appeals court once again reversed his conviction on Thursday, saying the trial judge erred in allowing a government witness to testify that he believed Litvak was his agent in bond trade. Litvak is currently serving a two-year term in a federal prison camp in Florida. (See court files)
Another former Jefferies managing director, Kevin Blaney, was barred from the securities industry for three months in September 2016 and fined $30,000 to settle civil claims that he had misled customers. He didn’t admit or deny the allegations. In January 2014, Jefferies agreed to pay $25 million to resolve criminal and civil probes of suspected abuses in the trading of mortgage-backed securities.
Cantor Fitzgerald & Co.
- David Demos
Also on Thursday morning, jurors in federal court in Hartford, Connecticut, cleared former Cantor Fitzgerald LP trader David Demos of claims he lied to customers in negotiations for trades of mortgage backed-securities. Charged in December 2016, he was accused of falsifying the prices at which his firm bought residential mortgage-backed bonds to get customers to pay more. He also misrepresented transaction costs to induce clients to sell the bonds for less, prosecutors said. (See court files)
- Ross Shapiro, Michael Gramins and Tyler Peters
Prosecutors say the three men, who supervised the residential mortgage-backed securities desk at Nomura’s offices in New York, conspired to defraud customers by lying about the price at which they purchased or sold a bond in order to boost profits. A federal jury in Hartford, Connecticut, last June acquitted Peters on all counts and Shapiro on eight counts but was undecided on a conspiracy charge. They convicted Gramins on conspiracy, couldn’t decide on two other courts and cleared him. Jury selection is scheduled for next month. (See court files)
- Frank DiNucci Jr.
The former Nomura vice president pleaded guilty in April 2017 to conspiracy to commit securities fraud and agreed to cooperate with the government. He testified in the trial of his former colleagues. (See court files)
Royal Bank of Scotland
- Matthew Katke and Adam Siegel
Katke, a former trader of collateralized loan obligations at Royal Bank of Scotland Group Plc, and Siegel, a bond trader, pleaded guilty in 2015 to fraud and agreed to cooperate with prosecutors. They were charged with lying to customers in order to get them to pay higher prices. RBS agreed to pay $44 million in penalties and restitution in October to resolve claims by U.S. prosecutors who found the firm lied about bond prices to boost its profits on trades. (See Katke court files) (See Siegle court files)
The Securities and Exchange Commission has also brought regulatory actions against other traders.
- Two former Barclays PLC mortgage-bond traders, Yoon Seok Lee and David Wong, agreed last year to pay $200,000 and $125,000, respectively, to settle claims that they misrepresented prices to customers. They didn’t admit or deny the assertions.
- A former Goldman Sachs Group Inc. trader, Edwin Chin, paid $400,000 in August 2016 to resolve allegations that he misled customers and caused them to pay higher prices, according to the SEC. Chin neither admitted nor denied the claims.
- A Morgan Stanley trader, Nicholas Bonacci, paid $100,000 and agreed to a one-year industry ban in September 2016 to resolve allegations that he misled customers about the value of securities. He neither admitted nor denied the allegations.
- A former Deutsche Bank AG commercial-mortgage-bond trader, Tianyu “Arnie” Zhou, settled with SEC in August 2016 and agreed to a minimum three-year industry ban and $50,000 penalty to settle allegations that he mismarked bonds to boost his profit He neither admitted nor denied the claims.
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