Two Americans have been convicted of money laundering and investment fraud in a scheme involving the sale of century-old railway bonds to investors, many of them said to be New Zealand farmers.

Steven Fishman, 59, of Corona, southeast of Los Angeles, and Joseph Thornburgh, 61, of Mounds, Oklahoma, were convicted in a Tulsa, Oklahoma court, the Associated Press reported.

US Attorney David O'Meilia, of Tulsa said the two men bilked more than 400 investors worldwide - "many of whom were sheep farmers in New Zealand" - and including about 20 Americans.

The fraud was claimed to have collected more than US$4 million by promoting as risk-free the purchase of bonds issued by a Chinese government that was overthrown in 1949, and of bonds issued in the 1850s by a now-defunct railroad.

Thornburgh and Fishman were indicted in November 2007 and will be sentenced on September 29. In April, a third man charged in the case, Robert Searles, 71, of Loudon, Tennessee, pleaded guilty to conspiracy to commit money laundering. He will be sentenced on August 28.

A fourth defendant, Wayne Leslie Davidson, 63, of Wanganui, remains at large. A grand jury was last year told he was living in New Zealand at least part of the time the scam was run from 1998 through to 2003.

Investors were told the railroad bonds were backed by the US government and Amtrak and included bonds issued by the Galveston, Houston, and Henderson (GH&H) Railroad -- which raised funds to start track construction in 1853.

Witnesses testified that Thornburgh and Fishman had said the bonds could be used to obtain lines of credit from European banks, which could then be used in high-yield investment programmes to reap millions of dollars of profit for investors.

The bonds were actually worth no more than their value as collectors' items.