A former Cantor Fitzgerald trader has been accused on charges that he defrauded investors by lying about the price of mortgage bond transactions he handled for them after the financial crisis, U.S. prosecuting attorney said on Friday.
David Demos, 35, was charged with securities fraud in an impeachment filed in federal court in New Haven, Connecticut, becoming the latest dealer to face charges for duplicitous customers on prices of mortgage-backed securities.
Demos, of Westport, Connecticut, seemed in court on Friday for a prosecution. In a joint statement subsequently, his legal team, which includes lawyers Peter Chavkin and Stanley Twardy, said Demos would fight the charges.
“Mr. Demos denies the charges made against him, together with the allegations that his communications and negotiations with counterparties were ‘material,'” his lawyers said in the statement. “He intends to dynamically support himself.”
Prosecutors said Demos, a dealer and managing director at Cantor Fitzgerald from November 2011 to February 2013, cheated customers by untruthfully inflating the price at which the company could buy housing mortgage-backed securities.
The goal, prosecutors said, was to bring customers to pay a higher price for mortgage bonds and to decrease the price at which Cantor could sell them in instruction to get investors to sell bonds at cheaper prices.
The scheme allowed Cantor Fitzgerald and Demos to obtain illegal profits, prosecutors said, while producing their customers to sustain millions of dollars of losses.
The victims contained within asset managers and firms affiliated with or subsidiaries of receivers of funds from the U.S. government’s financial crisis-era bailout program, the Troubled Asset Relief Program, prosecuting attorney said.
The case marked the latest action by national prosecutors in Connecticut against dealers accused of duplicitous customers on prices of mortgage-backed securities.
In December 2015, a national appeals court reversed a first conviction in the enquiry against Jesse Litvak, a former Jefferies managing director who was found shamefaced in 2014 and punished to two years in prison.