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Louis Lanzano/AP
Federal agents exit 26 Federal Plaza with handcuffed former Bear Stearns hedge fund
manager Matthew Tannin.(AP)

Two Former Bear Stearns Execs Indicted for Fraud

June 19, 2008 05:30 PM
by Cara McDonough
The former fund managers surrendered to the FBI Thursday and were to be arraigned in federal court Thursday afternoon.

30-Second Summary

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Ralph Cioffi, 52, and Matthew Tannin, 46, ran two funds at Bear’s asset management unit, which lost bets on sub-prime mortgage-backed securities, The Financial Times reports.

The two have been indicted for mail fraud and conspiracy to commit securities fraud, marking “the first prosecution in a U.S. crackdown on subprime fraud,” according to Bloomberg.

Investors lost $1.6 billion when two hedge funds managed by Cioffi and Tannin imploded in June last year and then collapsed. The funds were invested in securities linked to sub-prime mortgages. One of the issues in the investigation is whether the two men, who were optimistic about the funds only weeks before the collapse, intentionally misled investors.

Their arrests are the latest in the Bear Stearns drama. In March, JPMorgan Chase bought the troubled firm for $2 a share, almost 99 percent below Bear’s all-time high trading price of $172.61 per share, set in January 2007.

If convicted, Cioffi and Tannin face up to 30 years in prison.

“The arrests are appropriate given the magnitude and the egregiousness of their alleged misconduct,” said attorney Steven Caruso, who is representing investors in arbitration claims against the funds.

Headline Links: Former Bear Stearns Managers surrender

Background: Bear’s fall, JPMorgan’s takeover

Related Topic: Samuel Israel

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