Trader, Kareem Serageldin, pleads guilty to role in banking crash

Former Credit Suisse employee convicted for mortgage fraud

In a case described by lawyers as a "tale of greed run amok", a trader who hid a £351m loss so he could pocket a £4.5m bonus has become the most senior City figure to be convicted for the kind of mortgage fraud that helped precipitate the global financial crisis.

Kareem Serageldin, the former global head of Credit Suisse's structured credit trading, deliberately inflated the value of mortgages and bonds from his Canary Wharf office and, it was claimed, ordered two others in his team, David Higgs and Salmaan Siddiqui, to do the same.

Serageldin's lies contributed to a £1.7bn write-down in the company's 2007 year-end financial results, but more disastrously helped to mask the failure of the sub-prime mortgage market which caused the collapse of the banking system.

After years of being pursued by US authorities, who eventually extradited him from the UK to face justice, Serageldin finally pleaded guilty to conspiracy in a packed New York City courtroom on Friday. His conviction will go a small way to answering claims that those responsible for the financial crisis have escaped being held to account for their actions. But it also raises the question of why the UK seems incapable of launching prosecutions in the same way as US authorities have done.

Born in Egypt, Serageldin moved to the US as a child and studied at Yale. He knew Credit Suisse traders were required to price securities they held at their market value on a daily basis, but, when their value dropped as the US housing market declined in 2007, he and others kept booking the mortgages and bonds artificially high. The scam was set to bring Serageldin more than £4.5m before the company discovered the fraud in 2008 after an internal audit. It then sacked the three men and withheld £3.4m of Serageldin's bonus.

In February last year, the US Security and Exchange Commission charged the three men with fraud. Serageldin was arrested outside the US Embassy in London in September after the American authorities became alarmed that the disgraced banker was seeking to revoke his US citizenship, reportedly because he hoped this would allow him to serve any sentence he might face in the UK. After his London arrest, prosecutors at Westminster Magistrates Court described the case as a "tale of greed run amok".

He told the US District Judge Alvin Hellerstein he did it "to preserve my reputation in the bank at a time when there was great financial turmoil in the marketplace". Higgs and Siddiqui previously pleaded guilty to overstating the value of the mortgage-backed assets, which were held in a portfolio called ABN1. But both men, who agreed to co-operate with prosecutors, claimed they acted at Serageldin's direction. Under a plea agreement with the government, Serageldin agreed to forfeit £650,000 as proceeds of the crime, and under federal sentencing guidelines, Serageldin is likely to receive about five years in prison when he is sentenced on 2 August.

Serageldin told the court: "I made a terrible mistake and I deeply regret my conduct."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links