News Flash: Bond Trader Lies

Give the children their ear-muffs; don’t let them hear. We must report to you that a bond trader may have lied.

Bond Traders are Old School

The trader in question may have misrepresented the price at which he bought the bond. He may have misrepresented who the actual seller was (it was his own firm, not another client). In speaking to the innocent buyer (a professionally managed fund), he may have misrepresented the returns of the bond at the stated price. These shocking allegations are described in the press and in the actual indictment against a Jefferies trader.

Unfortunately for the trader in this case, those acts are alleged to have been committed against recipients of TARP funds. In other words, prosecutors say he lied to the US government. Bad luck for him.

Common practice in the bond market among private parties is now potentially worth 20 years in prison to the trader.

Either the common practice is wrong, or the 20 years is wrong. Or both. We vote for both.