Major Corporations Caught Up In $1 Billion Fraud Scheme

Former Credit Suisse Group broker, Julian Tzolov, has been sentenced to two more years in prison in addition to time served for operating a fraudulent scheme costing institutional investors $1 billion, according to a Reuters report. Tzolov was arrested in 2008 and pleaded guilty to three counts of securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud in federal court in 2009. After he was released on a $3 million bond, he removed his electronic monitoring device and fled to Spain. He ended up being returned to the US after his arrest in Spain and began assisting in the prosecution of his partner in crime, Eric Butler.

Tozolov and Butler were charged with defrauding major institutional clients who wanted to invest their excess cash reserves in safe, short term investments. The two men told the clients that the money would be placed in securities backed by government guaranteed student loan debt, when it was actually invested in securities backed by subprime mortgages and risky corporate debt. Some of the victims of the fraud included heavy weights like GlaxoSmithKline and Roche International, who began to question their investments after the auction rate securities (ARS) market froze in February 2008.

Tzolov will pay $1.15 million in restitution and be deported to Bulgaria following his stint in prison. Butler was convicted and sentenced to five years in prison in January 2010. He is presently free on bail pending his appeal.

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