Two Wall Street Players Ensnared in New Probe

Two Wall Street Players Ensnared in New Probe

by Jake Bernstein ProPublica

More than three years after the financial crisis, Wall Street watchdogs are still uncovering questionable actions rooted in that time. The latest revelation involves one of the more creative packagers of securities who contributed to a trail of billions in soured deals, as well as a much-maligned rating agency.

The Financial Industry Regulatory Authority 2014 an independent, non-governmental regulatory body 2014 has recommended disciplinary action against two men for “alleged misrepresentations in connection with the sale” of a complex security.

The recommendation is preliminary. No civil or criminal charges have been filed.

The men, Alexander Rekeda and Timothy Day, are both affiliated with Guggenheim Capital, a privately held, financial services company that does everything from trading securities to providing investment advice. According to its web site, the firm, headquartered in New York, has 1,700 employees in 25 offices located in 10 countries, and it manages about $125 billion.

A lawyer for Rekeda could not be reached for comment. ProPublica has learned that he is no longer with Guggenheim. Day, who is still at Guggenheim, did not respond to a request for comment. We will update this post when they are reached.

FINRA has been investigating the men over the sale of a type of security known as a collateralized loan obligation, or CLO. The investigation touches on a CLO called Nine Grade Funding II, although it remains unclear if this CLO is the main focus of the probe. FINRA’s filing did not elaborate on the type or character of the “alleged misrepresentations” it said were involved in the sale of the CLO it is investigating.

In a story published Monday evening, the Wall Street Journal reported that Rekeda was under investigation by FINRA for an unnamed CLO. The Journal also reported that Rekeda is being investigated by the Securities and Exchange Commission for a collateralized debt obligation, or CDO, he helped construct while employed by the Japanese bank Mizuho.

As we detailed in our series the Wall Street Money Machine, Rekeda was involved in the creation of several CDOs with Magnetar, a hedge fund that helped put together more than $40 billion of the securities. Magnetar often lobbied for riskier assets to be put into the CDOs and then placed bets against many of the investments, reaping tremendous profits when the deals soured. (Magnetar has never been charged with any wrongdoing, and has always maintained that it did not have a strategy to bet against the housing market.) The investigation into Rekeda is one of the few public signs that regulators are considering charges against a top banking executive involved in a Magnetar deal.

Nine Grade Funding was a CLO comprised of other CLOs backed by corporate loans. It was issued at a time when few such securities were being sold. The CLO was featured prominently in allegations by a whistleblower, Eric Kolchinsky, against the rating agency Moody’s. Kolchinsky alleged that Moody’s allowed bonds to be added to the CLO in January 2009 and that it allowed the CLO to keep its previous rating. Moody’s took these actions, according to Kolchinsky, despite plans already in the works by the rating agency to downgrade all such securities. Moody’s denied the allegations. After Kolchinsky was forced out of the firm, he testified about the deal before the House Committee on Oversight and Government Reform.

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4closureFraud.org

Comments
4 Responses to “Two Wall Street Players Ensnared in New Probe”
  1. 1ofthemany says:

    WE THE PEOPLE have a problem Huston an ongoing PROBLEM- that is this statement “regulators are considering charges against a top banking executive involved in a Magnetar deal.” And the point is WHAT????Well lets think for a moment and we can all say ” I am considering being an millionaire” so this is BS babble ONCE again they think they can gloss over the FRAUD facts that are rammed in your face, how utterly ridiculous, excuse me judge I beg to differ !!! WE ARE NOT THAT STUPID ALL THE TIME !!! wish they would find a new rap for peter’s sake, I am considering Secession from the rhetoric, they are so tiring with this “we may we might crap” or is it just me getting old from the torture?

    • lvent says:

      1ofthemany…that is because all of their CRIMINAL, UNSUSTAINABLE, MASSIVE, SO CALLED DERIVATIVES DEBT…AKA AS MASSIVE FRAUD … ALL $1.2 QUADRILLION DOLLARS WORTH..IS WELL HIDDEN IN THEIR, UNREGULATED, UNSECURED, ELECTRONIC SHADOW BANK…!!! MWAHAHA….!! THEREFORE, SOMEONE NEEDS TO PUSH THE FRAUDSTERS MASSIVE, $1.2 QUADRILLION DOLLARS IN UNSUSTAINABLE DEBT…. DELETE BUTTON…….AND DELETE THEM ALL OFF OF THE PLANET…..!

  2. Beth A. says:

    FINRA is worse than a government regulatory body.
    FINRA maybe ‘independent” as noted in the story but it is “regulated” by the SEC because it is a SELF-REGULATORY organization. It has been more than repeatedly criticized over the years for going light on its members (the broker/dealers are “members” of FINRA).

  3. ChrisYAHanWatcher4YAH says:

    “Financial Regulators,” regulating “Financial Schemers:” Their probably; Honeing their Skills; to refine the

    Legalsleezy Financial R– USE? This can’t work out for the VICTIMS, like the Attorney Generals R– USE the A.G.’s will PROFIT, and The VICTIM get VICTIMIZED by: Rapacious legal mercenaries, ad infinitum!
    What a COUNTRY for: Legal Eagle$

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