{"id":5275,"date":"2012-02-07T00:00:00","date_gmt":"2012-02-07T06:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2012\/02\/two_excredit_suisse_executives"},"modified":"2022-04-22T11:02:58","modified_gmt":"2022-04-22T16:02:58","slug":"two-excredit-suisse-executives","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/two-excredit-suisse-executives\/","title":{"rendered":"Two Ex-Credit Suisse Executives Plead Guilty to Mortgage-Backed Securities Fraud"},"content":{"rendered":"<p>Salmaan Siddiqui and David Higgs have pled guilty to conspiracy to commit wire fraud and conspiracy to falsify books in the mortgage-backed securities fraud case against them. Higgs was former a Credit Suisse managing director while Siddiqui had been vice president.<\/p>\n<p>The US Securities and Exchange Commission and the Justice Department have been conducting coordinated enforcement efforts against Higgs, Siddiqui, and Kareen Serageldin. They are charged with fraudulently inflating asset-backed bonds\u2019 prices during late 2007 and early 2008. The bonds consisted of commercial mortgage-backed securities and subprime residential mortgage-backed securities in Credit Suisse\u2019s trading books. Their alleged manipulation of the bond prices resulted in the financial firm getting a $2.65B write-down of its end of the year financial results for 2007. Meantime, seeing as trading book profitability determines bonuses, the three defendants obtained hefty ones.<\/p>\n<p>In addition to the three men, the SEC is also suing Faisal Siddiqui as a fourth defendant.  In its securities fraud complaint, the Commission accused the men of being involved in a scam to fraudulently overstate the prices of over $3B of subprime bonds. Recorded phone calls document their fraudulent actions. <\/p>\n<p>Serageldin, who was Credit Suisse\u2019s Structured Credit Trading global head, reportedly initiated the MBS fraud while Higgs, who was with the financial firm\u2019s Hedge Trading, oversaw the operation. The Siddiquis, who are not related to each other, were brokers that allegedly falsely processed the bonds\u2019 prices. <\/p>\n<p>In August 2007, the defendants reportedly started pricing the bonds in a way that would benefit them, rather than recording the fair value. The MBS scam would continue to accelerate as the credit markets faltered. By the end of the year, they were pricing the bonds at falsely high levels. Higgs would later on get the bond prices raised beyond their year-end levels to gain favorable P &amp; L results at the end of January. <\/p>\n<p>In February, Credit Suisse reported having a 2007 net income of $7.12 billion and fourth quarter earnings of $1.16B. Seeing as these figures incorporated the false gains, the information was materially misleading and false. Their scam fell apart when Credit Suisse senior management realized that specific bonds that the defendants\u2019 controlled had been priced abnormally high. <\/p>\n<p><strong>MBS Pricing by Credit Suisse Traders<\/strong><br \/>\nCredit Suisse traders must price the securities that they hold at fair value, which is determined by current market price or the current price for a similar liability or asset. When there is no liquid market, the traders have to refer to other indicia to determine their assets\u2019 fair value. Credit Suisse brokers know that the ABX indices are the benchmark for specific securities backed by home loans and that they must refer to it when placing a price on RMBS bonds and related products. <\/p>\n<p>\n<a href=\"https:\/\/www.housingwire.com\/articles\/ex-credit-suisse-bond-players-plead-guilty-mbs-fraud\/\">Ex-Credit Suisse bond players plead guilty to MBS fraud<\/a>, Housing Wire, February 2, 2012<\/p>\n<p><a href=\"https:\/\/www.fbi.gov\/newyork\/press-releases\/2012\/manhattan-u.s.-attorney-and-fbi-assistant-director-in-charge-announce-charges-against-two-former-credit-suisse-managing-directors-and-vice-president-for-fraudulently-inflating-subprime-mortgage-related-bond-prices-in-trading-book\">Manhattan U.S. Attorney and FBI Assistant Director in Charge Announce Charges Against Two Former Credit Suisse Managing Directors and Vice President for Fraudulently Inflating Subprime Mortgage-Related Bond Prices in Trading Book<\/a>, FBI, February 2012<\/p>\n<p><a href=\"https:\/\/www.sec.gov\/litigation\/litreleases\/2012\/lr22247.htm\">SEC Charges Former Credit Suisse Investment Bankers in Subprime Bond Pricing Scheme<\/a>, SEC, February 1, 2012<\/p>\n<p><strong><br \/>\nMore Blog Posts:<\/strong><br \/>\n<a href=\"https:\/\/www.investorlawyers.com\/blog\/2011\/06\/district_court_in_texas_decide\">District Court in Texas Decides that Credit Suisse Securities Doesn\u2019t Have to pay Additional $186,000 Arbitration Award to Luby\u2019s Restaurant Over ARS<\/a>, Stockbroker Fraud Blog, June 2, 2011<\/p>\n<p><a href=\"https:\/\/www.investorlawyers.com\/blog\/2010\/04\/credit_suisse_group_ag_must_pa_1\">Credit Suisse Group AG Must Pay ST Microelectronics NV $431 Million Auction-Rate Securities Arbitration Award<\/a>, Stockbroker Fraud Blog, April 5, 2012<\/p>\n<p>Citigroup to Pay $285M to Settle SEC Lawsuit Alleging Securities Fraud in $1B Derivatives Deal, Institutional Investor Securities Blog, October 20, 2011\n<\/p>\n<p> <a href=\"https:\/\/www.investorlawyers.com\/blog\/two-excredit-suisse-executives\/#more-5275\" class=\"more-link\">Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Salmaan Siddiqui and David Higgs have pled guilty to conspiracy to commit wire fraud and conspiracy to falsify books in the mortgage-backed securities fraud case against them. Higgs was former a Credit Suisse managing director while Siddiqui had been vice president. The US Securities and Exchange Commission and the Justice Department have been conducting coordinated [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3817,3752,3757],"tags":[],"class_list":["post-5275","post","type-post","status-publish","format-standard","hentry","category-credit-suisse","category-financial-firms","category-mortgagebacked-securities"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Two Ex-Credit Suisse Executives Plead Guilty to Mortgage-Backed Securities Fraud &#8212; Investor Lawyers Blog &#8212; February 7, 2012<\/title>\n<meta name=\"description\" content=\"Salmaan Siddiqui and David Higgs have pled guilty to conspiracy to commit wire fraud and conspiracy to falsify books in the mortgage-backed securities &#8212; February 7, 2012\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.investorlawyers.com\/blog\/two-excredit-suisse-executives\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Two Ex-Credit Suisse Executives Plead Guilty to Mortgage-Backed Securities Fraud &#8212; Investor Lawyers Blog &#8212; February 7, 2012\" \/>\n<meta name=\"twitter:description\" content=\"Salmaan Siddiqui and David Higgs have pled guilty to conspiracy to commit wire fraud and conspiracy to falsify books in the mortgage-backed securities &#8212; February 7, 2012\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Shepherd Smith Edwards &amp; Kantas, LLP\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Two Ex-Credit Suisse Executives Plead Guilty to Mortgage-Backed Securities Fraud &#8212; 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