NEW HAVEN, Conn. — There will be no stay in “Broker Raton” for this bond trader.
After four years and two trials, Jesse Litvak, a former Jefferies bond trader, was sentenced to two years in prison for lying about the price of bonds and ripping off clients — the same punishment he received nearly three years earlier for the same crimes.
In addition to the time behind bars, Connecticut federal judge Janet C. Hall imposed three years of probation and a $2 million fine, which was heftier than the $1.75 million fine he got when originally convicted.
The sentence came at the end of a four-and-a-half-hour court hearing that was hotly contested by Litvak’s team of lawyers. This time around, Litvak wanted 8 months of house arrest at his home in Boca Raton, Fla. — a town so chock full of traders it’s gotten the nickname “Broker Raton.”
Prosecutors, however, wanted to put Litvak in federal prison until 2028. In the end, it was Litvak’s own actions that did him in, Judge Hall said.
“Your victims would not have paid you what they paid you had they known the truth,” she said near the end of the marathon sentencing. “You did this to make more money.”
Litvak, 42, was at the center of a closely-watched Wall Street drama over lying to customers about the price of mortgage-backed securities — and one of the few traders to ever get caught.
His conviction and sentence is likely to have a ripple effect and lead to charges against other traders, and even whole banks, who were involved in the same practice.
The investment bank bigwig was once a rising star at Jefferies, generating major profits for an investment bank that has a notoriously rough-and-tumble culture.
But the boost came at too high a price: In 2013, Litvak was arrested on charges of making $2.25 million in illegal profit between 2009 and 2011 by puffing up the price of bonds he was selling — and ripping off investors in the process.
One of the most damning pieces of evidence against the trader to have come out during the January trial was a chat transcript that Litvak edited to make it look like one customer had paid more for bonds.
He then sent that faked conversation to a second trader at Invesco—in order to get that person to pay the higher price.
Litvak’s lawyer Dane Butswinkas, claimed during in January that the tactics were unsavory — he compared his client to a “used car salesman” — but that they weren’t illegal. Litvak’s clients included large, sophisticated investors like AllianceBernstein, which has nearly $500 billion in assets under management.
That argument ultimately failed to persuade a jury, and he was found guilty of a single count of securities fraud.
In deciding the guidelines to sentence Litvak, Judge Hall considered about $6.3 million worth of fraud over 76 transactions, all but one of which he wasn’t convicted on.
This isn’t the first time that Litvak has faced a prison sentence.
In 2014, the trader was originally found guilty of ten counts of securities fraud in the same 100-year old courthouse, and was sentenced to two years behind bars.
A Manhattan appeals court later tossed the jury’s verdict tossed when it came to light that evidence favorable to his defense shouldn’t have been excluded.
His behavior between trials ended up hurting his chance for leniency. Not only had he been caught sending text messages decrying “dumb juries” and declaring “victory,” but in 2015 he filed a suit against AllianceBernstein trader Michael Canter, who testified against him.
Judge Hall said that that suit in particular may have affected Canter’s demeanor on the stand, since during the second trial he was less enthusiastic and animated.