A former top securities trader at Goldman Sachs was barred from the industry by the Securities and Exchange Commission on Tuesday for bilking the bank's customers.

The SEC said that between 2010 and 2012 Edwin Chin knowingly misled customers about the price and source of available residential mortgage-backed securities (RMBS) in order to expand his and the bank's trading commissions.

In a settlement with the SEC, Chin did not admit or deny the fraud findings of the probe but agreed to pay $400,000 covering penalties and ill-gotten profits.

According to the market regulator's legal ruling published Tuesday, Chin offered clients RMBS bonds at what he represented as a separate seller's price, portraying himself as a fair broker between the two parties.

In fact, Chin was selling bonds out of Goldman's own holdings that had been acquired at a much cheaper price, and the sales reaped the bank large gains and large commissions for Chin.

In five incidences documented by the SEC, Chin reaped more than $1.5 billion in "extra profits" for Goldman.

The SEC did not say whether Goldman would be forced to give up its gains from the trades.

"With no public exchange showing the price for each RMBS trade as it occurs, investors purchasing these securities rely on dealers to be honest about the purchase price they paid," said Michael Osnato, chief of the SEC Enforcement Division's Complex Financial Instruments Unit, in a statement.

The SEC said it is continuing to investigate the fraud.