Tzolov and Butler worked as partners in Credit Suisse's Corporate Cash Management Group, a division that helped clients manage excess corporate cash holdings, according to court papers. They routinely falsified the names of the securities they put their clients in by, for example, adding "ed" or "student loan" and deleting "housing," according to the filing.
The brokers earned higher commissions from selling securities backed by corporate debt and mortgages than from selling those backed by student loans.
"Tzolov provided substantial assistance to the government which resulted in the trial conviction of the defendant Eric Butler," prosecutors wrote.
Butler and Tzolov were allowed to keep $4.45 million in signing bonuses under a July 2010 arbitration ruling lost by their former employer, Morgan Stanley, at the Financial Industry Regulatory Authority, or Finra.
Appeals Court
The two men joined Morgan Stanley after leaving Credit Suisse.
On June 2, the federal appeals court in Manhattan ruled against Credit Suisse's appeal of a U.S. judge's order to pay STMicroelectronics, Europe's largest chipmaker, about $400 million over the securities it bought from Tzolov and Butler.
Today's filing didn't recommend a specific sentence for Tzolov. Federal guidelines carry a life term for his crimes because the fraud exceeded $400 million. The maximum for all the counts together under each statute caps his exposure at 45 years, according to the filing.
The maximum sentencing for bail-jumping is 10 years, which would run consecutively to any other sentence he receives, according to the filing. The government didn't recommend leniency on that count.
Tzolov pleaded guilty in July 2009 to one count each of securities-fraud conspiracy, wire-fraud conspiracy, securities fraud, bail jumping and visa fraud, and seven counts of wire fraud.
The case is U.S. v. Tzolov, 08-cr-370, 09-cr-475 and 10-cr- 83, U.S. District Court, Eastern District of New York (Brooklyn).