Ex-Jefferies Arrest Shows Market Lacking Transparency

Jesse Litvak, a former Jefferies & Co. mortgage-bond trader, is accused of cheating customers by using unscrupulous sales tactics that the U.S. Securities and Exchange Commission’s deputy director of enforcement called “unfit for a used car lot.” Such practices are widespread in a market lacking transparency, investors and regulators say.

Litvak was arrested Jan. 28 and charged by the U.S. Attorney’s Office in Connecticut with defrauding firms, including BlackRock Inc., AllianceBernstein Holding LP and Magnetar Capital LLC, out of more than $2 million by allegedly lying about the origins and prices of securities. Some of the trades involved a federally subsidized program to revive the mortgage-bond market after it froze in 2008. Litvak, 38, pleaded not guilty.