United States prosecutors are investigating whether two former Credit Suisse Group brokers, Eric Butler and Julian Tzolov, lied to investors about how their funds were put into auction rate securities (ARS).  The probe is the first criminal investigation into the $330 billion auction-rate securities market, which froze in February.

Butler and Tzolov resigned from Credit Suisse on September 7, 2007 after being suspended for "prohibited activity."  The pair subsequently accepted jobs with Morgan Stanley, but were terminated by Morgan Stanley on July 7th.  The reason for their termination from Morgan Stanley has not been publicly disclosed.

Presently, Credit Suisse is not a target of the federal probe.  In fact, Credit Suisse notified regulators of the brokers’ misconduct and is cooperating with the federal investigation.