“Amid a broader crackdown on the securities industries, the Securities and Exchange Commission secured one of their most high profile victories on Thursday, as a jury in New York found former Goldman Sachs trader Fabrice Tourre liable of civil-fraud. Tourre is one of the most visible faces of Wall Street hubris during the financial crisis, having been found to mislead investors in a mortgage-backed securities deal that netted billionaire John Paulson’s hedge fund $1 billion just as the housing bubble was bursting.
“Tourre was found liable for six of the seven charges of securities law violation brought against him by a nine person jury after two days of deliberations, and now faces fines and possibly a ban from the securities industry. The jury’s decision puts the focus on Tourre’s defense team, bankrolled by Goldman Sachs, which days ago chose not to call any witnesses to the stand in an apparent show of confidence.
“Judge Katherine Forrest is now responsible for setting the possible financial penalties, which according to Dealbook range from $5,000 to $130,000 per violation. The SEC is responsible for determining whether Fabulous Fab will ever be able to set a foot on Wall Street, work-wise, again.”
“In what had been one of the biggest victories in the aftermath of the subprime crisis, major banks including JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, and Ally/GMAC settled charges of shady mortgage practices for $19 billion with the attorneys general of 49 states. Still, the verdict against Fabrice Tourre gives regulators a more personal victory against what the SEC’s lead lawyer, Matthew Martens, called “Wall Street greed.”
“It remains questionable whether the verdict is a victory for the SEC. Despite having gotten a jury to find an employee from a major Wall Street bank as having perpetuated securities fraud, regulators haven’t been able to pin down a major executive. According to Dennis Kelleher, a former securities lawyer and head of nonprofit Better Markets, the SEC fails to apply the law to the power centers of Wall Street due to a combination of factors, from the power of financial institutions to a flawed legal system, to the revolving door which sees former Wall Streeters acting as regulators.And while Main Street will continue to ask itself why the little guy takes the hit while the big fish get off the hook, Tourre will have a long time to think about his defense team’s decision not to call any witnesses.”
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