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Twice-convicted ex-Jefferies trader faces prison after losing bail request

NEW YORK, Aug 22 (Reuters) - A federal appeals court on Tuesday rejected former Jefferies Group mortgage bond trader Jesse Litvak's request to stay out of prison while he appeals his second conviction and two-year sentence for defrauding customers on bond prices.

The order by the 2nd U.S. Circuit Court of Appeals in Manhattan likely means Litvak, 42, will begin serving his sentence on Sept. 12 as scheduled, though the court expedited his appeal.

Kannon Shanmugam, a lawyer for Litvak, declined to comment.

Prosecutors accused Litvak of lying to customers such as AllianceBernstein and Soros Fund Management about bond prices from 2009 to 2011, generating $2.25 million of illegal profit for his employer and hoping to boost his own pay.

Though jurors in New Haven, Connecticut on Jan. 27 convicted the former Jefferies managing director on only one of the 10 counts he faced, Litvak got the same two-year term he received in 2014 after his first conviction, on 15 counts.

A $2 million fine was also imposed.

Litvak has said both convictions were based on a flawed theory that his alleged lies about bond prices were material to customers, and that the trial judge made erroneous rulings.

He said this raised substantial legal questions likely leading to a reversal or a new trial, and that denying bail would force him to serve some of his sentence before his appeal could be decided.

The appeals court did not explain why it refused to grant bail during Litvak's latest appeal, as it had done before overturning his first conviction in December 2015.

Jefferies had worked in the Stamford, Connecticut, office of Jefferies, a unit of Leucadia National Corp.

U.S. authorities have criminally charged eight traders in a five-year federal crackdown into deceptive bond trading. Two have been convicted, two were acquitted of various charges at trial, three have pleaded guilty and one has pleaded not guilty.

The case is U.S. v. Litvak, 2nd U.S. Circuit Court of Appeals, No. 17-1464.

(Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker)