September 26, 2012 / 8:20 PM / 5 years ago

Ex-Credit Suisse trader arrested in subprime case

NEW YORK (Reuters) - A former senior Credit Suisse Group AG CSGN.VX trader was arrested in London on Wednesday and faces extradition to the United States on fraud charges involving subprime mortgage bonds worth $3 billion.

People stand at a tram stop in front of the headquarters of Swiss bank Credit Suisse at the Paradeplatz square in Zurich in this July 11, 2012 file photo. REUTERS/Arnd Wiegmann/Files

The arrest of Kareem Serageldin, former global head of structure credit trading for Credit Suisse, marks an apparent victory for U.S. prosecutors, who earlier this year won convictions against two of the his former colleagues.

U.S. prosecutors have been waiting for nearly eight months for Serageldin, 39, to return to the country to face charges.

A spokesman for London’s Metropolitan Police said extradition proceedings will commence on Thursday.

A spokeswoman for Serageldin’s lawyer, Sean Casey of Kobre & Kim in New York, declined to comment.

Prosecutors said Serageldin was the most senior banker charged in a scandal dating back to 2007, in which mortgage-backed securities traders were caught trying to cover up $540 million in losses on their books.

Two other employees pleaded guilty in U.S. federal court in February to criminal charges of conspiracy to commit wire fraud and falsify books and records, making it the first successful U.S. prosecution of employees of a major bank involved in the subprime meltdown of 2007-08.

In pleading guilty, David Higgs, who cooperated with investigators, admitted in court that he had “manipulated and inflated” values he reported for a battered portfolio of mortgage bonds. He said he acted at the instruction of his former boss to hide losses and meet profit targets. Meeting the targets was essential to the team’s bonuses.

U.S. prosecutors charged Serageldin at the same time as the other two traders. Serageldin was charged with the same conspiracy counts, as well as additional charges of falsifying books and records and wire fraud.

He, however, remained in London after the charges were filed.

There are no other arrests expected in the case.

Reporting By Emily Flitter and David Henry; Additional reporting by Michael Holden in London; Editing by Peter Cooney and David Gregorio

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