Thorell, a graduate of Providence College in Rhode Island, left the firm in 2013, according to two ex-colleagues who asked not to be identified. The Visium credit fund at which he worked managed $470 million at its peak. The fund was liquidated in September 2013 after a string of investor redemptions that summer.

The fund invested in several debt securities that were distressed and highly illiquid, in the expectation that their cheap prices would yield big returns if the companies turned around. But when the market moved against their positions, they found other ways to value the holdings rather than accepting the market price, prosecutors said.

Provide Quotes

Visium managers used friendly brokers to provide quotes on securities that were better than the market price -- often for instruments they knew little about, according to the government. The fund’s managers would call the brokers using personal cell phones –- to avoid brokerages’ recorded lines -– and tell them the price they wanted for the security, prosecutors said. The brokers would then send them the official quote back over their computer terminals.

For two years, Thorell and others solicited fraudulent quotes from brokers and sent them to the fund’s administrator to override valuations on illiquid distressed holdings, according to court papers. When Lumiere sought more brokers to provide sham quotes, Thorell volunteered one particular candidate because the broker worked at a “bottom of the barrel” firm, according to the affidavit.

After leaving Visium, Thorell visited a former colleague at his Manhattan apartment and said he was approaching the SEC about participating in its whistle-blower program, according to one of the people familiar with the case. SEC spokeswoman Judy Burns declined to comment on the case or whether Thorell was part of the program. By January 2014, Thorell was secretly recording conversations for the government with at least one former colleague, according to court records.

Spokesmen for the Federal Bureau of Investigation and U.S. Attorney Preet Bharara in New York, who filed the criminal case, declined to comment, as did Jonathan Gasthalter, a Visium spokesman. The SEC has sued Valvani, Plaford and Lumiere.

‘Financial Benefit’

Thorell could receive “a financial benefit” for blowing the whistle on the alleged scheme, according to the FBI’s June 14 affidavit. Under an SEC program, participants can collect as much as 30 percent of the U.S. recovery if it comes from their information.

Vandersnow was one of two brokers who most actively participated in the plot, according to court papers. He spent several years with UBS Securities LLC in New York, and joined C&Co/PrinceRidge LLC in June 2009, according to his Financial Industry Regulatory Authority brokerage record. Prosecutors said the scheme began in 2011. PrinceRidge was absorbed by J.V.B. Financial Group LLC in October 2013. A J.V.B. spokesman declined to comment.