NEW YORK – A former Wall Street broker facing criminal charges linked to the subprime mortgage meltdown has become the target of an international manhunt, federal authorities said Friday.
Prosecutors notified a judge overseeing the case that Julian Tzolov disappeared on May 9 from a Manhattan home where he had been under house arrest since last year after surrendering his passport and posting a $3 million bond. An electronic monitor on his ankle had been removed.
Since then, investigators armed with an arrest warrant have "undertaken an extensive effort to determine Tzolov's whereabouts and apprehend him," prosecutors wrote in court papers.
They asked for a two-month postponement of the Bulgarian-born defendant's trial in Brooklyn as the search for him continues.
Defense attorney Ben Brafman said he lost contact with his client weeks ago.
"We have no idea where he is or what may have happened to him," the lawyer said Friday.
Tzolov, 36, had been set to go to trial on June 29 with former colleague Eric Butler, another former broker for Credit Suisse's private banking division. Both men pleaded not guilty in September to securities fraud, wire fraud and conspiracy charges.
An indictment alleges Tzolov and Butler duped foreign corporate customers into believing that $1 billion in securities being purchased in their accounts were backed by federally guaranteed student loans and were safe like cash.
In reality, the auction rate securities were backed by subprime mortgages, collateralized debt obligations and other high-risk investments, the authorities said. Because of their higher risk, they brought a higher yield and much larger commissions for the brokers.
Tzolov and Butler deceived clients by sending them e-mail confirmations in which the terms "St. Loan" or "Education" were added to names of other types of securities purchased for the customers, prosecutors said.
As a result, customers were stuck holding more than $800 million in securities that were not easily traded and lost their value when the market for the securities began to collapse in August 2007, according to the SEC.
Credit Suisse has said it notified authorities as soon as it became aware of the fraud, and is cooperating with the investigation. The defendants resigned in 2007.
In convicted, each man each faces up to 20 years in prison and a $5 million fine.