SEC/DOJ go after MBS Traders for Fraud- while the Big Bank Instigators go Free

By Ben Lane/Housing Wire

Nearly two years ago, the Securities and Exchange Commission and the U.S. Attorney’s Office for the District of Connecticut charged three former Nomura Securities International residential mortgage-backed securities traders with fraud, alleging that they “repeatedly lied” to customers about the pricing information of mortgage bonds and defrauded customers out of millions of dollars.

Earlier this year, the Department of Justice hit the three RMBS traders, Michael Gramins, Ross Shapiro, and Tyler Peters with additional charges, including one count of conspiracy, two counts of securities fraud and six counts of wire fraud.

The three traders went on trial last month, and a jury handed down a verdict this week.

All in all, only Gramins was found guilty – and only on one charge.

According to the U.S. Attorney’s Office for the District of Connecticut, Gramins was found guilty on one count of conspiracy, and not guilty of one count of securities fraud and five counts of wire fraud.

The jury could not reach a verdict on one count of securities fraud and one count of wire fraud.

The jury also found Shapiro not guilty of two counts of securities fraud and six counts of wire fraud, but could not reach a verdict on the conspiracy count.

The jury found Peters not guilty of all nine counts of the indictment.

The traders were originally charged with misrepresenting the bids and offers being provided to Nomura for mortgage bonds, as well as the prices that Nomura bought and sold the securitizations and the spreads the firm earned facilitating RMBS trades.

The original indictment stated that Shapiro, Gramins, and Peters supervised the RMBS desk at Nomura in New York.

Shapiro served as the managing director, and oversaw all of Nomura’s trading in RMBS. Gramins was the executive director of the RMBS Desk and principally oversaw Nomura’s trading of bonds composed of sub-prime and option ARM loans.

Peters was the senior-most vice president of the RMBS desk and focused on Nomura’s trading of bonds composed of prime and Alt-A loans.

The indictment claimed that Shapiro, Gramins, and Peters also engaged in fraudulently deflating the price at which Nomura could sell a RMBS bond to induce their customers to sell bonds at cheaper prices, thereby causing Nomura and the three defendants to profit illegally.

The SEC claimed that the lies and omissions made to customers by Shapiro, Gramins, and Peters generated at least $5 million in additional revenue for Nomura, and the lies and omissions by the subordinates they trained generated at least $2 million in additional profits for the firm.

But when it came to their trial, the jury didn’t agree, finding Gramins guilty on just on count.

Gramins now faces a maximum sentence of five years.

“This has been a demanding prosecution, and I thank the jury for its service,” U.S. Attorney Deirdre Daly said. “Our investigation into fraudulent trading practices in the RMBS and other financial markets has had a marked impact on the industry and will continue.”

4 Responses

    HOLD PUBLIC SERVANTS ACCOUNTABLE!!! The securities fraud and recordation crimes are all tied together.

  2. To US Attorney CT Division Dear Ms Daly:You and your associates have many more high priority matters to sink your teeth into than a trio of tiny toms if you wish to make asignificant impact on the blatently illegal and contemptuous conduct of financial institutions particularly mortgage banks and servicers involving fraud,,( even fraud on the court.)statutory and regulatory violations,(TILA,RESPA-REG Z-Reg X FDCPA, etc etc )fictitious financial documents (see 12 USC 4501; 18 USC 514;) There is a grabbag.Keep in mind there are a bevy of Federaland often State ( Ct Cutpa) regulatoryagencies in the game but there does not seem to be any traction.
    You know the names.Have a visit with Ct AG Jepsen and Asst AG Budzik,both of National Settlement fame who now know the billions did not make a dent but were regarded by Mr Damon as “keep doing it”tickets.
    Here is an obscure one to make your Mark:Nationwide Title Clearing now under very recent consent orders procecuted in Illinois and Florida.producing , I am just advised by JPMorganChase ,,robosigning ,robonotarizing and recording 1-3000 mortgage documents a day for the large banks without conformation and verification of the data,The executions and notary stamps are performed by camoflaged NTC employees
    The CEO of NTC just attempted in writing to deceive , obfuscate and misinform in an effort to seek legitimacy Unfortunately his big competitor ServiceLink Holdings was just corralled by a Federal Consent Order Imposed by Federal Reserve, Office of Comproller of Currency,and FDIC restraining the fraudulent,illegal and dishonest practices common to both entities
    Go get em. Address 2100 Alt.19Nortg,Palm Harbor,Fla 34683
    I have samples of their work 203 644-6832 Weston,Ct.

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