The U.S. Federal Bureau of Investigation reports that a former Credit Suisse broker has been found guilty of securities fraud in a case involving almost US$1 billion of investor losses.

According to Benton Campbell, U.S. Attorney for the Eastern District of New York, a federal jury in Brooklyn found former a Credit Suisse broker guilty of conspiracy and securities fraud after a three-week trial. He was convicted, and another broker previously pled guilty, for selling mortgage-backed collateralized debt obligations (CDOs) to clients who had actually placed orders to buy securities backed by government-guaranteed student loans, it says.

The FBI reports that the brokers concealed their scheme by falsifying the names of the ARS the clients bought and otherwise misleading the clients into believing they had bought ARS backed by student loans. The securities they actually sold their clients paid them higher commissions.

“In approximately August 2007, the scheme was discovered when the market for the mortgage-backed CDOs purchased by the companies collapsed and various auctions for CDOARS began to fail. The resulting losses to investors totalled almost US$1 billion,” it said.

“The defendant’s fraudulent misrepresentations saddled investors with unknown risks they did not bargain for,” said Campbell. “This case shows that those who engage in such schemes will be held to account for their criminal activity.”

IE