David Aufhauser, the senior lawyer at UBS’s investment bank in New York, has quit three days after he was identified as one of seven executives at the centre of a fraud lawsuit filed by state authorities.

Mr Aufhauser, who is accused alongside other senior UBS executives of pulling his own money out of the collapsed auction-rate securities market while the bank continued to tell clients their money was safe, resigned last night, according to a statement.

He will continue in a consulting role at the Swiss bank until the end of September.

Mr Aufhauser, a former general counsel to the US Treasury, was identified last week as "Executive A" in a lawsuit filed by Andrew Cuomo, the New York State Attorney-General, that accuses UBS of perpetrating a "multibillion-dollar fraud" against investors.

The lawsuit says that seven unidentified bankers — including Executive A — 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.

UBS said 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 Aufhauser was identified as Executive A by The Wall Street Journal and Reuters.

UBS is facing a separate lawsuit relating to its role in the auction-rate securities market brought by the state of Massachusetts, which has also filed charges against Merrill Lynch.

The case accuses Merrill of aggressively promoting the securities at the same time it knew 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.

On Friday, Mr Cuomo's office said it plans to also bring charges against Citigroup over its role in promoting auction-rate securities. The bank said it acted in the best interests of its clients.

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 (£168.6 billion) market, which became a casualty of the wider credit market problems.

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