Two former Credit Suisse Group AG brokers accused of fraudulently selling clients subprime mortgages linked to auction-rate securities pleaded not guilty to a dozen new fraud charges.
Julian Tzolov and Eric Butler were first indicted last year on securities fraud and conspiracy charges in U.S. District Court in Brooklyn, New York. They are accused of falsely telling clients their products were backed by federally guaranteed student loans, according to a U.S. indictment filed in September. They allegedly said the investments were a safe alternative to bank deposits or money market funds.
The new charges include wire fraud stemming from e-mails the defendants sent. Tzolov and Butler, who remain free on bond pending trial, were also charged with conspiracy. Without telling customers, they allegedly began using client funds to purchase higher-yield, mortgage-backed collateralized debt obligations, known as CDOs, according to the indictment.
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