Ex-Credit Suisse trader gets 30 months in jail

A former top Credit Suisse trader was sentenced to two and a half years of prison on Friday in New York for inflating subprime mortgage-related bond prices during the housing market collapse.

Ex-Credit Suisse trader gets 30 months in jail
Photo: Andrew Cowie/AFP

British citizen Kareem Serageldin, 40, was extradited by Great Britain to the United States in April and accepted to plead guilty.

The fraud allegedly took place between late 2007 and early 2008, as the collapsing US housing bubble sent millions of home mortgages into default and wiped off hundreds of billions of dollars in value from mortgage-backed securities widely held by banks and other institutional investors.

In March 2008, Credit Suisse announced it was restating its 2007 year-end earnings with a $2.65-billion write-down, a large portion of it related to the fraud.

"With today's sentence, Kareem Serageldin will now pay a steep price for the role he played in a conspiracy to cover up more than one hundred million dollars in subprime mortgage-related losses — the loss of his liberty," US Attorney Preet Bharara said in a statement.

Serageldin was also sentenced to two years of supervised release and ordered to pay $1 million forfeiture, a $150,000 fine and a $100 special assessment.

David Higgs and Salmaan Siddiqui, who worked under Serageldin in the investment banking division of the Swiss bank, pleaded guilty in a New York court last year to one count of conspiracy to falsify books and records and commit wire fraud.

Each faces a maximum sentence of five years in prison and a fine of at least $250,000. They are still awaiting sentencing.

The defendants were charged with inflating the prices of asset-backed bonds, which comprised subprime residential mortgage-backed securities and commercial mortgage-backed securities in Credit Suisse's accounts.

Serageldin, Higgs and Siddiqui secured significant year-end bonuses for themselves through the alleged fraud since bonus amounts were largely based of trading books' profitability, officials said.

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Probe unearths second spying case at Credit Suisse

An internal Credit Suisse probe confirmed Monday that a second executive had been spied on, following earlier revelations that the bank's former head of wealth management was tailed by private investigators.

Probe unearths second spying case at Credit Suisse
Photo: Depositphotos

But Switzerland's number two bank maintained that just one senior leader, who has since been forced out, was entirely to blame for both incidents and that rest of the top brass had not been aware of the activities. 

Releasing the investigation conducted by the Homburger law firm, Credit Suisse said that “it has been confirmed that Peter Goerke, who was a Member of the Executive Board at the time, was placed under observation by a third-party firm on behalf of Credit Suisse for a period of several days in February 2019.”

The probe was launched following media reports last week that spying at Credit Suisse ran deeper than one case.

The banking giant was shaken by the discovery last September that surveillance had been ordered on star banker and former wealth management chief Iqbal Khan.

READ: Credit Suisse boss resigns following spying scandal

Kahn was tailed after he jumped ship to competitor UBS, sparking fears he was preparing to poach employees and clients.

That revelation came after Khan confronted the private investigators tailing him, leading to a fight in the heart of Zurich. Khan pressed charges.

An initial investigation by Homburger blamed former chief operating officer Pierre-Olivier Bouee, who stepped down, but found no indication chief executive Tidjane Thiam was involved.

The probe results released Monday echoed those findings, concluding that Bouee “issued the mandate to have Peter Goerke put under observation.”

“As was the case with Iqbal Khan, this observation was carried out via an intermediary,” it said, stressing that Bouee “did not respond truthfully” during the initial investigation “when asked about any additional observations and did not disclose the observation of Peter Goerke.”

The new investigation also did not find indications that Thiam or others in the board or management “had any knowledge of the observation of Peter Goerke until media reported on it,” the statement said.

“The Board of Directors considers the observation of Peter Goerke to be unacceptable and completely inappropriate” it said, adding that it had issued an apology to Goerke.

It added that “safeguards” were already in place to avoid future similar misconduct. Switzerland's market watchdog FINMA meanwhile said last week that it was “appointing an independent auditor to investigate Credit Suisse in the context of observation activities.”

“This investigator will clarify the relevant corporate governance questions, particularly in relation to the observation activities,” a statement said Friday.