Two traders at Credit Suisse have pleaded guilty to wire fraud and falsifying data after authorities said they had manipulated the bank's record systems, as the credit crunch approached, in order to help conceal over half a billion dollars' worth of losses.
The traders admitted to circumventing a mandatory real time reporting system introduced by Credit Suisse, manually entering false profit and loss (P&L) figures as the products they handled collapsed in value. They did so, according to the accusations, under heavy pressure from their manager, who has also been charged.
The pleas come after a four-year investigation that involved the FBI trawling through thousands of financial records, emails and recorded phone calls – some of which provide potentially devastating evidence. The FBI and US Attorney have insisted they are determined to hold individuals responsible for any possible part they played in the economic crisis.
The traders, David Higgs, 42, and Salmaan Siddiqui, 36, pleaded guilty to attempting to manipulate around $3 billion in subprime mortgage-backed securities on order to reduce how bad losses looked. A large amount of the alleged activities took place in Credit Suisse's London offices in Canary Wharf, as well as in New York.
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Their line manager, Kareem Serageldin, 38, has been charged with falsifying records and with wire fraud. Serageldin, who was the managing director of structured credit at the bank, lives in the UK, and will be expected to travel to the US to face the charges. It is understood he may contest the charges.
The three are also facing civil charges from US financial regulator the Securities and Exchange Commission. Credit Suisse itself has not been charged by the FBI or SEC.
Subprime mortgages are essentially loans issued to customers whom the banks expect to have more difficulty paying – and are charged at a higher interest rate. Those mortgages and the complex investment vehicles attached to them were widely blamed as playing a key role in triggering the current economic crisis.
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