(Reuters) - A bond trader pleaded guilty on Monday to conspiring to defraud Royal Bank of Scotland Group Plc customers by misrepresenting the prices of bond transactions he and others handled for them in an effort to boost the bank’s profit.
Adam Siegel, 37, pleaded guilty in federal court in Hartford, Connecticut, for participating in a multimillion-dollar securities fraud scheme and agreed to cooperate in what prosecutors said in a statement was an ongoing investigation.
Siegel is the second RBS trader to plead guilty amid a probe by federal prosecutors in Connecticut into whether banks cheated their customers on prices of mortgage-backed securities.
On Dec. 8 a federal appellate panel reversed a key and first conviction in the probe against Jesse Litvak, a former Jefferies Group Inc managing director who was found guilty in 2014 and sentenced to two years in prison.
The 2nd U.S. Circuit Court of Appeals in New York ordered a new trial for Litvak on ten counts of securities fraud in the case, while voiding other charges.
From 2008 to 2014, Siegel was co-head of U.S. asset-backed securities, mortgage-backed securities and commercial mortgage-backed securities trading at RBS Securities Inc.
Neither Siegel’s lawyer nor an RBS spokesperson were immediately available to comment.
Deirdre M. Daly, U.S. Attorney for the District of Connecticut, said on Monday that Siegel had pleaded guilty to conduct occurring between 2008 and 2014 on RBS’ Stamford, Connecticut, trading floor that he managed.
Daly said Siegel admitted that he and others had conspired to induce customers who were buying various mortgage-backed securities to pay inflated prices, and those who were selling to accept deflated prices for bonds, all to benefit RBS.
The misrepresentations included telling certain buyers that bonds held in RBS’s inventory were being offered for sale by a fictitious third-party seller, which allowed RBS to charge the buyer an extra, unearned commission, Daly said.
Siegel was released on $250,000 bond and is scheduled to be sentenced next March. He could face a maximum of five years in prison.
Earlier this year, former RBS bond trader Matthew Katke of New York pleaded guilty to one count of conspiracy to commit securities fraud.
Reporting by Nate Raymond and Suzanne Barlyn; Additional reporting by Jonathan Stempel; Editing by Alan Crosby and Frances Kerry
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