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.”
