This story appeared in Bank Digest.
The SEC has charged four former veteran investment bankers and traders at Credit Suisse Group for allegedly engaging in a complex scheme to fraudulently overstate the prices of $3 billion in subprime bonds during the height of the subprime credit crisis. The SEC alleges that Credit Suisse's former global head of structured credit trading Kareem Serageldin and former head of hedge trading David Higgs, along with two mortgage bond traders, deliberately ignored specific market information showing a sharp decline in the price of subprime bonds under the control of their group. They instead priced them in a way that allowed Credit Suisse to achieve fictional profits. Serageldin and Higgs periodically directed the traders to change the bond prices in order to hit daily and monthly profit targets, cover up losses in other trading books and send a message to senior management about their group's profitability, according to the SEC, which alleges that the mispricing scheme was driven in part by these investment bankers' desire for lavish year-end bonuses and, in the case of Serageldin, a promotion into the senior-most echelon of Credit Suisse's investment banking unit.