The US Securities and Exchange Commission (SEC) has charged a Deutsche Bank bond salesman and a credit trader from Millennium Management in the first case involving alleged insider trading on credit default swaps (CDSs).

America’s top financial regulator is working on at least 50 investigations involving CDSs, which have been blamed for complicating the credit crunch by helping to spread losses from souring mortgages across global markets.

Today’s case relied on taped phone calls between Jon-Paul Rorech, a salesman for Deutsche Bank in the United States, and Renato Negrin, who ran a credit trading portfolio for Millennium, an $11 billion (£7.2 billion) New York-based hedge fund manager.

Scott Friestad, deputy director of the SEC’s enforcement division, said the two men had “schemed to engage in insider trading of CDSs to the detriment of investors and our markets”.

The SEC alleged that Mr Rorech obtained information from Deutsche’s bankers about a forthcoming bond issue by VNU, the Dutch conglomerate, that was being underwritten by the German bank. He allegedly passed this information to Mr Negrin, who bought CDS contracts, which insure the owner against default by a debt issuer, on VNU.

When VNU issued the bonds in July 2006, the price of a VNU CDS jumped and Mr Negrin allegedly made a $1.2 million profit for Millennium.

Sources said that the SEC was continuing to look into whether other people were involved in the alleged insider trading.

The Financial Services Authority, the British regulator, assisted the SEC with its investigation, but declined yesterday to give more information on its involvement.

Laywers for Mr Rorech and Mr Negrin said that they would deny the charges.

Israel Englander, who founded Millennium with $35 million in 1990, said yesterday that his fund employed a “small army of compliance personnel”.

Mr Englander, a Brooklyn-born self-made billionaire, noted that there was no implication that the fund had done anything wrong. Millennium has put aside profits allegedly made from the trades until the case is complete.

Times Recommends

• ‘Lame duck’ fear for FSA as chief quits
• Storm over bailout of EU's most ailing economy
• Northern Rock to drop 100% savings guarantee