The U.S. Department of Justice and the New York Attorney General’s Office are investigating practices by Credit Suisse AG in connection with its sales of mortgage-backed securities (MBS). The investigation comes on the heels of the arrest of a former executive of the bank, Kareem Serageldin, who is charged with manipulating mortgage-linked bonds by inflating their value as a part of a $5.35 billion trading book called ABN1 in 2007.
The practices allegedly have cost the bank in excess of a half-billion dollars in damages. Serageldin, the former head of the Structured Credit Group at Credit Suisse, was charged in February 2012. Earlier this year, two of Serageldin’s former colleagues pled guilty to conspiracy for their role in the scheme. (“DOJ, Schneiderman Target Credit Suisse Over MBS: Report,” Law360.com, October 4, 2012).