The report stated that certain employes in the Jefferies’ Mortgage and Asset-Backed Securities Trading Group allegedly fraudulently misrepresented the risk of RMBS between buyers and sellers to increase the profitability of the trades. In addition, the employees purportedly charged the buyer an extra commision by concealing that the RMBS were sold from Jefferies’ own inventory.
To make matters worse, members of Jefferies management allegedly turned a blind eye to the scam and the employees who were making misrepresentations to customers. The report also indicated that when Jefferies became aware of the alleged fraud they conducted an internal investigation and cooperated fully with the government.
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