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Ex-Jefferies Trader Litvak Won’t Testify at Fraud Trial

Former Jefferies & Co. managing director Jesse Litvak ended his defense without testifying in his trial on charges that he defrauded customers out of more than $2 million in trades of mortgage-backed securities.

Closing arguments are scheduled for tomorrow before U.S. District Judge Janet C. Hall in New Haven, Connecticut. Jurors will deliberate afterward.

Litvak, 39, of Manhattan, is accused of misrepresenting how much sellers were asking for securities and what customers would pay, and pocketing the difference for Jefferies. He’s the only person charged with fraud as part of an initiative to distribute more than $20 billion from the Troubled Asset Relief Program, which the U.S. government created during the 2008 credit crisis to help bail out banks.

“I will not be testifying,” Litvak told Hall today.

A 1997 graduate of Emory University in Atlanta, Litvak joined Jefferies’s Stamford, Connecticut, office in April 2008 after more than a decade at RBS Greenwich Capital in Greenwich, according to Financial Industry Regulatory Authority records. He was fired in December 2011.

Litvak was indicted 13 months later on charges of securities fraud, making false statements and fraud connected to TARP. He denies wrongdoing and faces as long as 20 years in prison if convicted of securities fraud.

New York-based Jefferies, which was acquired by Leucadia National Corp. (LUK) last year, agreed in January to pay $25 million to settle U.S. probes of suspected abuses in the trading of mortgage-backed securities.

Biggest Recession

Pools of home loans securitized into bonds were a central part of the housing bubble that burst, helping send the U.S. into the biggest recession since the 1930s. The largest global banks lost billions of dollars on mortgage-backed debt as U.S. home prices plunged and the market for such assets dried up.

While the securities rebounded after the crisis, markets remained illiquid with wide spreads between bids from buyers and sellers. Congress authorized the $700 billion rescue in October 2008.

Litvak’s arrest predated a wider probe into mortgage-backed securities at banks including JPMorgan Chase & Co. and UBS AG. Those firms received U.S. requests for information about trades during the financial crisis, people familiar with the probe previously said.

The case is U.S. v. Litvak, 13-cr-00019, U.S. District Court, District of Connecticut (New Haven).

To contact the reporters on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at cdolmetsch@bloomberg.net; and John Dillon in federal court in New Haven, Connecticut, at jdillon@snet.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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