UPDATE 5-Accused ex-CS trader caught after months on run

* Fugitive former trader arrested in Spain

* New wire fraud charges against two former traders

* Indictment cites trail of emails
(Recasts with details of arrest)

By Grant McCool

NEW YORK, July 15 (Reuters) - An indicted former Credit
Suisse Group AG (CSGN.VX) (CS.N) trader was arrested in Spain
on Wednesday, U.S. law enforcement sources said, two months
after he fled facing trial on fraud charges.

Bulgarian national Julian Tzolov, 36, was charged last
September along with another former CS trader Eric Butler, with
fraudulently selling $1 billion worth of mortgage-backed
auction-rate securities to clients.

Tzolov was arrested by police in Spain, but no further
details were immediately available according to two law
enforcement sources. They asked not to be identified because
details of the ex-trader's return were still to be worked out
by authorities.

In a letter filed in court, the U.S. Attorney for the
Eastern District of New York, Benton Campbell, said "the
government writes to inform the court that the defendant (and
fugitive) Julian Tzolov has been apprehended."

The letter to presiding Judge Jack Weinstein gave no other
details. A trial was set to start on July 20 in Brooklyn
federal court for Butler, 37, and Tzolov, but it was unclear
whether it would go ahead as scheduled.

The judge is hearing a previously scheduled pretrial
argument on Thursday and more information may be revealed
then.

FUGITIVE SINCE MAY

The arrest of Tzolov, who escaped on May 9 from house
arrest and electronic monitoring in his New York apartment,
came as a new indictment was unsealed against him and his
former colleague.

The indictment was unsealed in Manhattan, a different
federal court district than the scheduled trial.

The new indictment accuses the former traders of 14 counts
of wire fraud, citing emails they sent to six unidentified
companies in Canada, Britain, Switzerland, Bermuda and Panama
"in the furtherance of the scheme" between February 2005 and
July 2007.

Butler and Tzolov were originally charged in September with
conspiracy to commit securities fraud and wire fraud. They
pleaded not guilty to the charges. Their trial was originally
scheduled for June 29 and postponed when Tzolov fled.

Prosecutors alleged that from November 2004 to September
2007 Butler and Tzolov tried to obtain higher sales commissions
by selling auction rate securities (ARS) backed by risky
subprime mortgages to Credit Suisse clients, when the clients
had ordered ARS backed by government-guaranteed student loans.

The clients lost their money with the failure of the market
for mortgage-backed ARS, debt reset at periodic auctions which
had been touted as safe and the equivalent of cash.

Tzolov's lawyer, Benjamin Brafman declined, comment and
Butler's attorney issued a statement.

"Against Eric Butler, it appears that the government has
brought an identical case in a different district to try to
give themselves two chances to win a case that they should not
have brought once," lawyer Paul Weinstein said.

Separately on Wednesday, prosecutors in Brooklyn said they
had charged Tzolov with jumping bail and also visa fraud for
unlawfully obtaining a U.S. permanent residence card.

The case is USA v. Tzolov and Butler 08-370 in U.S.
District Court for the Eastern District of New York
(Brooklyn).
(Reporting by Grant McCool, editing by Matthew Lewis)