Bear Stearns Hedge Fund Managers Not Guilty of Fraud

Two former Bear Stearns hedge fund managers have been acquitted of lying to investors about the health of two investment accounts just as the epic U.S. financial downturn was gaining speed.

Ralph Cioffi and Matthew Tannin were the first Wall Street executives put on trial for criminal charges of fraud for their actions. Federal prosecutors accused the men of deceiving clients and reassuring them that their investments were safe, all the while knowing the shaky funds tied to sub-prime mortgages were in big trouble.

Investors in two Bear Stearns funds — the High Grade Fund and the Enhanced Leveraged Fund – lost as much as $1.6 billion when the funds collapsed in 2007. Bear Stearns collapsed in March 2008 and was sold to JPMorgan Chase & Co in a government-brokered fire sale.

Jurors in the U.S. District Court in Brooklyn where the trial was held deliberated for just one day before finding the men not guilty on all charges, according to The Wall Street Journal.

The trial was closely watched by other state and federal prosecutors around the country, who saw the case as a possible indicator of how their own fraud cases relating to the global financial crisis might fare. It is unclear what the acquittals in the Cioffi and Tannin case will mean to those separate prosecutions.

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