Ex-Credit Suisse trader arrested in London in trading scandal

A former senior Credit Suisse trader was arrested in London on Wednesday in a fraud case tied to the valuations of subprime mortgage bonds, marking a win for U.S. prosecutors who have been awaiting his return since charging him early this year.

London's Metropolitan Police arrested Kareem Serageldin, the former global head of structure credit trading for Credit Suisse Group AG .

"He was taken into police custody and extradition proceedings will commence at Westminster Magistrates Court tomorrow," a police spokesman said.

Serageldin, 39, 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, according to prosecutors.

Two other employees pleaded guilty in U.S. federal court in February to criminal charges of conspiracy to commit wire fraud and falsify books and records. U.S. prosecutors charged Serageldin with the same conspiracy counts, plus additional charges of falsifying books and records and wire fraud.

Serageldin remained in London after the charges were filed.

In a statement at his plea hearing, one of the traders, David Higgs, the former managing director of Credit Suisse's investment banking division, described the scheme.

"I, with the agreement and assistance of Kareem Serageldin and others, manipulated and inflated the cash bond position markings of a trading book referred to as 'ABN1' in order to hide losses in this book and to achieve specific daily and month-end profit and loss objectives," Higgs told the court.

A spokeswoman for Serageldin's lawyer, Sean Casey of Kobre & Kim in New York, declined to comment.

The convictions of the two men who pleaded guilty marked the first successful criminal prosecutions against individuals at investment banks involved in the subprime meltdown, and took four years to secure, even without a trial.

There are no other arrests expected in the case.