In United States v. Litvak, the Second Circuit (Winter, Chin, Korman D.J.) reversed the conviction of Jesse Litvak, a securities trader at investment bank Jefferies & Co., for securities fraud premised on Litvak’s misrepresentations to trading counterparties about Jefferies’ profits on the transaction. The Court held that the district court improperly admitted testimony that Litvak’s counterparty believed that Litvak was acting as his fiduciary agent—even though in fact no such relation existed.  The Court explained that the counterparty’s erroneous, subjective belief was irrelevant as to the objective materiality of the misstatement, but likely swayed the jury in convicting.  The decision also raises interesting questions about expectations between traders and their customers, and the Government’s role in policing that relationship. For our discussion and commentary on this decision, please see our article on Law 360.

-By Michael Schwartz and Harry Sandick