Three former Nomura traders who sold residential mortgage-backed securities face rare criminal charges that they lied to bank customers about bond prices, according to an indictment unsealed on Tuesday.
A federal grand jury handed down the 10-count indictment against the former bond traders, who are charged with defrauding Nomura customers by artificially inflating and deflating the prices of RMBS bonds, and misrepresenting bids and offers provided to the bank.
Nomura made at least $7m in additional profits because of the alleged scheme, which helped net $22m in compensation for the traders from 2009 to 2013, according to the allegations.
The charges reflect a growing move by law enforcement agencies to target individuals in cases of alleged financial wrongdoing, after criticisms that no executives have been held accountable for the 2008 financial crisis and other incidents.
Most of the world’s largest banks have paid hefty fines to settle allegations that they mis-sold RMBS related to the financial crisis.
In the Nomura case, the Securities and Exchange Commission announced parallel fraud charges, accusing the traders of repeatedly lying to customers who relied on them for accurate pricing information of the securities.
The victims of the alleged Nomura scheme are pension funds and a fund manager of the Trouble Asset Relief Program, the US bailout fund set up to rescue ailing financial institutions during the financial crisis.
Those charged are Ross Shapiro, who oversaw Nomura’s RMBS trading in New York, Michael Gramins, executive director of the RMBS desk, and Tyler Peters, vice-president of the RMBS desk.
Nomura declined to comment. Mr Gramins’s attorney, Marc Mukasey, said his client did nothing wrong. “We won’t be bullied by the government. It’s reprehensible that they are proceeding when they know full well that their legal theory is in doubt,” Mr Mukasey said.
Attorneys for Mr Shapiro did not respond to a request for comment.
For several years, these three defendants handsomely profited by repeatedly lying to Nomura’s customers in violation of federal law
– Deirdre Daly, US Attorney for Connecticut
he traders are accused of training junior colleagues to lie to customers and providing them with language that would help them in their scheme, according to the indictment.
One of the subordinates allegedly told a sales colleague he “lied” about a bond price and “marked [it] up 2 pts,” according to chatroom dialogue cited in the indictment. The salesperson responded, “ha sick . . . well played.”
The traders are also accused of creating fake third parties to increase their profits, and worked with at least one outside client to broker deceptive trades, the indictment said.
“For several years, these three defendants handsomely profited by repeatedly lying to Nomura’s customers in violation of federal law,” said Deirdre Daly, US Attorney for Connecticut.
In May, Nomura lost a lawsuit filed by the Federal Housing Finance Agency, which sued 19 of the world’s biggest financial institutions in 2011 on behalf of Fannie Mae and Freddie Mac, the US government-backed mortgage companies.
The suit argued that banks mis-sold securities by packing them with mortgages to borrowers who had little chance of repaying the loans.
Additional reporting by Ben McLannahan
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