David Higgs, a former London-based Credit Suisse managing director, has plead guilty to charges of conspiracy to falsify books and records, as well as committing wire fraud, the Associated Press reported.
Higgs, as well as another trader, Salmaan Siddiqui, turned themselves over to the FBI in New York on Wednesday morning. They each face up to five years in prison, The Huffington Post reported.
The probe is investigating exaggerations made by brokers at Switzerland's second-largest bank about the value of subprime mortgage securities as the housing market was deteriorating, The Huffington Post reported. Authorities say brokers convinced clients to invest money into the securities market for subprime mortgages by making the market sound healthy when it was not.
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In 2008, Credit Suisse found "mismarkings" on mortgage-backed bonds, Bloomberg reported. A month later, the bank announced it would write down $2.65 billion after an internal review found the errors were made intentionally "by a small number" of traders, who were fired or suspended as a result. Credit Suisse did not disclose the traders' names at that time, according to Bloomberg.
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"Rather than mark these securities down to market as we were required to do," Higgs said, he and others at Credit Suisse manipulated and inflated the cash bond position markings to meet monthly profit-and-loss objectives and conceal losses, the AP reported. Higgs said the changes gave a false impression to the bank's senior management that the securities were profitable. As a result, Credit Suisse reported false year-end numbers for 2007 in their records.
"I did this because I wanted to remain in good favor with my boss … and enhance my job performance," Higgs told reporters.
Higgs has not worked at Credit Suisse since his employment was terminated in 2008 as a result of the fraud, Steven Vames, a spokesman for the bank in New York, told Bloomberg. He will remain free on $500,000 bail and had been permitted to remain in England while he cooperates with prosecutors, the AP reported.
"Today is a terribly difficult day for me and my family," Higgs said. "I am truly sorry for what I've done."
Others expected to be charged in the probe have not yet been identified publicly, the AP reported.
In February 2011, the US indicted four Credit Suisse bankers for helping Americans evade taxes.