FBI arrests ex-Credit Suisse broker (Reuters)

NEW YORK (Reuters) - An indicted former Credit Suisse (CSGN.VX) broker was in U.S. custody on Thursday to face charges over deceptive sales of subprime-related auction-rate debt, the FBI said.

FBI officials said former broker Julian Tzolov, a native of Bulgaria, was arrested at New York's John F. Kennedy International Airport and taken to FBI offices in Manhattan.

"Mr Tzolov is in U.S. custody and he will be arraigned on the charges," the FBI official said.

Tzolov and a former colleague, Eric Butler, were charged with conspiracy, securities fraud and wire fraud in an indictment unsealed in U.S. District Court in Brooklyn on Wednesday.

Butler, 36, pleaded not guilty at his arraignment to all the charges and he was released on $2.5 million bail, but Tzolov was out of the country and did not appear in court with his former colleague.

The office of the U.S. Attorney in the Eastern District of New York said Tzolov, 35, was scheduled to be arraigned in court on Friday.

An attorney for Tzolov could not immediately be reached for comment.

Prosecutors accused Butler and Tzolov of misleading customers into believing that auction-rate securities in their accounts were backed by federally guaranteed student loans and were a safe and liquid alternative to bank deposits or money market funds.

In a similar separate civil complaint, the Securities and Exchange Commission said the two men made unauthorized purchases of more than $1 billion in auction-rate securities for corporate customers' accounts from November 2004 to August 2007.

According to regulators, brokerages misled investors into believing that auction-rate debt, which has rates that reset in periodic auctions, was safe and the equivalent of cash.

Much of the $330 billion market has been frozen since February, when brokerages abandoned their traditional role as buyers of last resort.

The brokers resigned from Credit Suisse in August last year. The firm said it told regulators and cooperated with the authorities.

(Editing by Leslie Gevirtz)