Federal prosecutors indicted two former hedge fund managers from soon-to-be defunct Bear Stearns today for misleading investors about the risks associated with two funds they managed.
The United States Attorney's Office for the Eastern District of New York in Brooklyn filed conspiracy, securities and wire fraud charges against the former hedge managers, Ralph R. Cioffi and Matthew Tannin, for misleading investors on the risk level of two funds that ultimately collapsed.
Mr. Cioffi was also charged with insider trading.
The Bear Stearns Cos. Inc. of New York shut down the hedge funds, the High-Grade Structured Credit Strategies Enhanced Leverage Fund and the High-Grade Structured Credit Strategies Fund, last July as the value of the firm’s mortgage-backed securities sank(InvestmentNewsJuly 18, 2007).
Attorneys for the defendants issued statements proclaiming their clients’ innocence.
“[Mr. Tannin] is being made a scapegoat for a widespread market crisis,” said his attorney, Susan Brune of New York-based Brune & Richard LLP.
If convicted on all charges, Mr. Cioffi and Mr. Tannin could face up to 25 years in prison.
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