Second Circuit Overturns Conviction of Institutional Trader But Upholds Government’s Securities Fraud Theory

On December 8, the United States Court of Appeals for the Second Circuit reversed the convictions of a former bond trader at Jefferies & Company for fraud against the United States and making false statements, and the Court vacated convictions for securities fraud and remanded the case to the U.S. District Court for the District of Connecticut for further proceedings on those charges. Jesse Litvak was successful in having his securities fraud convictions overturned on appeal based on certain evidentiary errors made by the district court, but he is expected to face retrial. Importantly, the Second Circuit’s opinion validated the government’s theory that the misrepresentations Mr. Litvak made to institutional clients regarding the price of bonds to disguise the amount of profit Jefferies made could be “material” under the securities laws.