US federal prosecutors suspect that a Wall Street broker who is the target of a criminal investigation into sales of mortgage-related securities has fled to his native Bulgaria.

US authorities have been investigating whether the suspected Bulgarian, Mr. Julian Tsolov, a former Credit Suisse broker, and his colleague Eric Butler lied to investors about how they placed their money in so-called "auction rate" securities tied to subprime mortgages, The Wall Street Journal reported.

Auction-rate securities, the paper says, allow issuers such as municipalities and student loan companies, closed-end mutual funds or financial institutions to borrow money for the long term but at short-term, or lower, interest rates. Weekly or monthly auctions conducted by Wall Street firms reset those rates.

However, this market seized up in February, leaving thousands of investors stuck with securities that they now can't sell and forcing many bond issuers, such as state and local governments, to refinance such debts, often at higher rates and after paying extra fees.

Tsolov and Butler resigned from Credit Suisse on September 7 2007, "amid accusations by clients that they were misled about the nature of the auction-rate securities they bought".

Clients said they were told the securities they purchased were backed by student loans when in fact they were backed by Collateralised debt obligations (CDOs), CDO's that were tied in part to subprime mortgages.

Mr. Tsolov, 35, has reportedly moved his belongings out of his condominium about a month ago, according to the doorman at the apartment building where he used to live.

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