A former senior Credit Suisse trader has been arrested in London and faces extradition to the United States on fraud charges involving subprime mortgage bonds worth $3 billion (SFr2.82 billion).
The arrest of the banking group’s former global head of structure credit trading marks an apparent victory for US prosecutors, who earlier this year won convictions against two of the his former colleagues.
The prosecutors have been waiting for nearly eight months for the 39-year-old man, an American and British citizen, to return to the US to face charges.
A spokesman for London’s Metropolitan Police said extradition proceedings will commence on Thursday.
Prosecutors said the former Credit Suisse employee 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 of his subordinates pleaded guilty in US federal court in February to criminal charges of conspiracy to commit wire fraud and falsify books and records, making it the first successful prosecution of employees of a major bank involved in the subprime meltdown.
One of the men, who cooperated with investigators, admitted in court that he had „manipulated and inflated“ values he reported for a battered portfolio of mortgage bonds, causing Credit Suisse to report incorrect figures.
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. The three men were fired by Credit Suisse in 2008 after the fraud was discovered.
US prosecutors charged the three bank employees at the same time with the same conspiracy counts, but the man arrested Wednesday faces additional charges of falsifying books and records and wire fraud.
The conspiracy charge carries a maximum five-year jail sentence, while the other counts could lead to conviction of up to 20 years in prison.
No other arrests are expected in the case.
The conviction is one of few linked to the collapse of the US subprime mortgage market. Two other former Credit Suisse brokers were convicted in 2010 of fraudulently selling subprime securities, leading to investor losses of $1.1 billion.
They falsely told clients that their products were backed by federally guaranteed student loans.