The US Securities and Exchange Commission has announced a civil action against four former veteran investment bankers at Credit Suisse Group for fraudulently overstating the prices of $3 billion in subprime bonds during the height of the subprime credit crisis.

The SEC’s complaint alleges that the former bankers deliberately ignored specific market information showing a sharp decline in the price of subprime bonds and priced them in a way that allowed Credit Suisse to achieve fictional profits. Bond prices were charged in order to hit profit targets, cover up losses in other trading books and send a message to senior management about their group’s profitability.

The SEC’s complaint alleges that the scheme reached its peak at the end of 2007, when the group recorded falsely overstated year-end prices for the subprime bonds. Despite acknowledging that the subprime bonds were mispriced, the group’s year-end results were approved without making any effort to correct the prices. When the mispricing was eventually detected in February 2008, Credit Suisse disclosed billions of dollars in additional subprime-related losses related to the investment bankers’ misconduct in violation of the Securities Exchange Act of 1934 and Rules.

SEC v. Kareem Serageldin et al., Civil Action No. 12 CIV. 0796 (Swain) (S.D.N.Y., filed Feb. 1, 2012)