Two former brokers have been charged with fraud and conspiracy over deceptive sales of subprime-related debt.

The US Attorney's office in Brooklyn and the Securities and Exchange Commission accused the former brokers, Eric Butler and Julian Tzolov, of selling securities tied to sub prime mortgages and claiming the investments were backed by the government.

Butler, 36, pleaded not guilty to charges of conspiracy, securities fraud and wire fraud after he was arrested by the FBI at his Manhattan apartment.

Butler was released on bail after posting a £1.2 million bond backed by his apartment.

His lawyer, Paul Weinstein, said Butler "believed he was doing the best for his clients, and they agreed until the entire auction rate securities market fell, which had nothing to do with him, and he will defend the charges."

Tzolov, 35, was believed to be out of the country, according to a person with knowledge of the investigation.

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