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Ex-Jefferies Exec Accused of Fraud a Real Romantic

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A former managing director at Jefferies was arrested on Monday for allegedly defrauding customers who purchased mortgage-backed securities (MBS) from the firm following the financial crisis.

Jesse Charles Litvak, 38, made headlines for the second time in a decade, with today’s news not being nearly as cheery. In September 2001, just days after 9/11, Litvak brought some joy to an otherwise solemn New York City movie theater by proposing to his now-wife using the movie projector, according to a wedding announcement in the New York Times.

''I am sorry to interrupt your movie, but I couldn't think of a better time and place to embarrass someone I love,” read the first slide. “My dearest Renee, will you spend the rest of your life with me?” said the second.

Litvak then bent to one knee, according to the Times, with the theater erupting in applause after his now-wife said yes.

Litvak’s attorney, Patrick J. Smith, a partner with DLA Piper LLP, confirmed the man facing charges is the same Jesse Litvak.

According to a complaint from the Securities and Exchange Commission, Litvak is accused of purchasing mortgage-backed securities from one customer and then selling them to other customers, often times without disclosing the real price paid for the security. Litvak also reportedly misled customers by creating a fictional seller, when in reality he was just selling MBS from Jefferies’ inventory at a higher price, according to the filing.

“Litvak repeatedly lied to his customers and invented facts to bring additional profits into his firm and ultimately his own pocket at their expense,” said George Canellos, Deputy Director of the SEC’s Division of Enforcement.

Through Smith, Litvak denied the allegations.

“Every Jefferies counter-party in each transaction in this indictment got the exact bond bargained for at a price each wanted to pay. These were principal transactions between sophisticated market participants. There were no ‘commissions’ on any of these trades. All of the profits that Jefferies earned on each trade were well within industry norms for the mortgage-backed bonds in this case. Jesse Litvak did not cheat anyone out of a dime. In fact, most of these trades turned out to be hugely profitable. The allegation that Jesse defrauded any counter-party -- PPIP or private -- is simply untrue. Jesse looks forward to the trial in this case so that his name can be cleared and he can get on with his career,” read the statement from his lawyer.

Jefferies didn’t immediately respond to requests for comment.

Litvak was fired from Jefferies on Dec. 21, 2011, according to Bloomberg. He faces up to 20 years in prison if convicted of all 11 counts.

AUTHORBeecher Tuttle US Editor

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