The general counsel of UBS’s investment bank is one of seven senior executives accused of pulling $21 million (£10.6 million) of their own money out of the collapsed auction-rate securities market, while the bank continued to tell clients their money was safe, according a report.

David Aufhauser, a former general counsel to the US Treasury, is the person referred to as “Executive A” in a lawsuit brought by Andrew Cuomo, New York Attorney-General, The Wall Street Journal reports, citing people familiar with the situation.

Mr Cuomo’s case, which accuses UBS of a “multibillion dollar fraud, says that seven unidentified bankers sold their personal holdings in the three months leading up to the collapse of the auction-rate securities market because they knew it was heading for a crisis.

Mr Aufhauser’s lawyer did not respond to calls seeking comment from The Wall Street Journal.

UBS told the paper that it would not identify any individuals adding that, while some of its employees had exercised “poor judgment” and it was considering disciplinary action, none had broken the law.

Mr Cuomo’s lawsuit includes details of an email sent to UBS executives, including Mr Aufhauser, warning of worsening conditions in the auction-securities markets.

The same day, the lawsuit says, Mr Aufhauser sent a message to his personal financial adviser saying he wanted to sell his holdings.

UBS is facing a separate lawsuit relating to its role in the auction-securities market from the state of Massachusetts, which yesterday filed charges against Merrill Lynch.

The case accuses Merrill of aggressively promoting the securities while knowing the market was falling. It includes an excerpt from an unnamed banker warning colleagues that the “market is collapsing. No more $2,000 dinners at CRU,” referring to a New York restaurant.

Merrill Lynch denies it defrauded investors.

Auction-rate securities are popular US debt instruments that are held as an alternative to cash because they earn higher rates of interest but can usually be sold at any time.

Several large investment banks are active brokers in the $330 billion market, which became a casualty of the wider credit market problems.

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