The former head of structured credit at Credit Suisse, Kareem Serageldin, was handed out a 30-month prison sentence for his role related to a scheme that artificially inflated the prices of subprime mortgage bonds. Serageldin had pled guilty to the charges of conspiracy to falsify books and records in April. In addition to jail time, US District Judge Alvin Hellerstein also required Serageldin to pay a USD 150,000 fine. This was on top of the over USD 1 million he said he would forfeit.
In his defense, the trader's lawyers did not ask for prison time. They said Serageldin had already given back to Credit Suisse USD 25.6 million in deferred compensation. Of the amount, Serageldin had earned an estimated USD 20 million before the years covered in the lawsuit. They also said Serageldin had been banned from the securities industry as part of a civil lawsuit he had agreed to settle with the US Securities and Exchange Commission.
However, Hellerstein said the jail sentence was needed to serve as a lesson to others. Hellerstein ruled, "You failed in doing what was right, and for this I have to punish you."
Serageldin was accused by prosecutors of conspiring with employees of Credit Suisse under him to falsify the values of subprime mortgage-backed bonds from August 2007 to February 2008. Although the housing and credit conditions had taken a turn for the worse then, Serageldin's trading book revealed otherwise. Prosecutors said Hellerstein's goal for mismarking the values was to cover up the trading loss. Prosecutors said the manipulation formed part of the USD 2.65 billion writedown taken by Credit Suisse.
David Higgs and Salmaan Siddiqui also gave a guilty plea to conspiracy charges filed against them last year. The two former colleagues of Serageldin are still waiting for their sentence to be handed out.
Serageldin apologized to the court for what he had done. He added, "My terrible mistake will live with me for the rest of my life."
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