Back in July, former Jefferies & Co. Managing Director and securities trader, Jesse Litvak, was sentenced to two years in prison for lying to clients about mortgage-backed securities, making him the first person to be convicted of fraud in relation to a $20 billion U.S. Treasury Department’s Troubled Asset Relief Program. But this rare case, where a securities trader got hard time, could soon change.
According to an article in Reuters, a federal appeals court signaled that Litvak has a good chance to overturn his conviction.
The article stated that the 2nd U.S. Circuit Court of Appeals on Friday granted Litvak's bid to stay out of prison while he appeals his March 7 conviction by a federal jury in New Haven, Connecticut
Litvak claimed that his customers were professionals who would have known if they were overpaying. He also said he had acted in good faith, using sales tactics that were common at Jefferies and approved by his supervisors.
In court papers, Kannon Shanmugam, a partner at Williams & Connolly representing Litvak, said jurors erred in finding that Litvak's alleged misrepresentations were material, and were instructed incorrectly by Chief Judge Janet Hall of the Connecticut district court on fraudulent intent.
He also said Hall wrongly excluded expert witness testimony on materiality and good faith, and testimony that Litvak's sales tactics had been in "widespread use" at Jefferies.
Litvak’s conviction was the first one to be tied to the Public-Private Investment Program. The program used TARP funds to spur investments in RMBS after the 2008 housing and financial crisis.