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
News
Leah Devine is only the ninth female to have made the Young Magician of the Year final since the contest began more than 50 years
peopleMeet the 16-year-old who has set her heart on being the first female to win Young Magician of the Year
News
Jonathan Anderson was born in Northern Ireland but now based between London, where he presents a line named JW Anderson
peopleBritish designer Jonathan Anderson is putting his stamp on venerable house Loewe
News
Andy Davidhazy at the beginning (left) and end (right) of his hike
video
News
Taylor Swift is applying to trademark song lyrics from 1989
people
Voices
The popularity of TV shows such as The Liver Birds encouraged Liverpudlians to exaggerate their Scouse accent
voicesWe exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing