A federal grand jury in Brooklyn, New York, has indicted Bulgarian Julian Tsolov and American Eric Butler, both former Credit Suisse brokers, on charges that they lied to investors about how $1billion of their money was placed into short-term securities, The Wall Street Journal said on September 4 2008.

The 12-page indictment describes how the brokers allegedly misled corporate clients around the world, primarily through emails The Wall Street said.

The brokers made it appear as if the securities were backed by federally guaranteed student loans, when in fact they were tied to riskier mortgage products and other debt that earned the brokers higher commissions, according to the indictment.

As previously reported, in July 2008 US federal prosecutors suspected Tsolov of having left the US shortly before prosecutors were preparing to bring criminal charges.

US authorities had been investigating whether Tsolov and Butler lied to investors. The investigation, according to the paper, started in early June and is the first known criminal matter stemming from the $330 billion auction rate securities market.

Auction rate securities, The Wall Street Journal said, allow issuers such as municipalities and student loan companies, closed-end mutual funds or financial institutions to borrow money for the long term but at short-term, or lower, interest rates. Weekly or monthly auctions conducted by Wall Street firms reset those rates.