The brokers are Julian Tzolov and Eric Butler. They came to minor fame two years ago, when the Securities and Exchange Commission sued them for ripping off their customers to the tune of $1 billion in a subprime bait-and-switch scheme.

Since then, Tzolov pleaded guilty to securities fraud and is awaiting sentencing. He helped the Justice Department in its case against Butler, who was convicted of securities fraud and faces five years in jail (though he is out on bail during his pending appeal).

It could have been worse, though. An arbitration panel run by the Financial Industry Regulatory Authority has ruled that neither man will have to repay Morgan Stanley  for the signing bonuses they got three years ago when they jumped ship from Credit Suisse, where all the subprime wrongdoing occurred.

Tzolov and Butler each got a $4.5 million loan from Morgan Stanley when they signed on in September 2007. The Wall Street Journal notes that brokers jumping ship typically receive “a bonus that is often equal to roughly twice the revenue they generated over the past year at their prior firm.”

And what a bargain that turned out to be for Morgan Stanley. Just a year after it hired them for the low, low price of $9 million, the SEC sued the two, saying they conspired to defraud investors in so-called auction rate securities – one of the first casualties of the credit meltdown.

The two had been at Credit Suisse for a year and a half and were running its “corporate cash management group” when, in February 2005, they started buying auction rate securities for customers who wanted safe, liquid investments that paid a little better than money market accounts or the like.

What the customers wanted, the SEC said in its suit, were securities backed by federally guaranteed student loans. But what they got, the agency said, were bonds “collateralized by subprime mortgages, collateralized debt obligations (“CDOs”), mobile home contracts, and other non-federally guaranteed non-student loan collateral.”

This was not going to work out for the clients no matter what, given what we know now about the fate of those sorts of investments. But the end came quickly: In August 2007, the markets for riskier securities collapsed as investors started to recognize that the housing bubble was imploding, taking asset values down with it. Failures in the auctions held to set rates on the auction-rate securities left the brokers’ customers with $817 million in dodgy securities they couldn’t sell, and which the SEC added “also have lost significant value.”

Morgan Stanley, which had accused Tzolov and Butler of fraudulently inducing it to hire them, told the Wall Street Journal the firm is “disappointed” with the arbitration decision. No kidding: Until now it seemed like it was practically impossible for the big firms to lose a case in Finra arbitration.