NEW YORK (CN) – Two former Bear Stearns hedge fund managers were acquitted Tuesday on charges of fraudulently misleading investors about the firm’s two largest hedge funds and costing investors $1.6 billion before the subprime mortgage fiasco toppled the bank. It was the first criminal trial of Wall Street executives stemming from the mortgage meltdown.
Ralph Cioffi and Matthew Tannin were indicted in June 2008. The jury in Brooklyn Federal Court reached its verdict Tuesday following a month-long trial.
In its lawsuit, the Securities and Exchange Commission also accused Cioffi of insider trading, but the jury ruled he was innocent of that charge.
The SEC claimed Cioffi and Tannin misrepresented the true state of the funds’ finances to keep bringing in new money and to prevent investors and institutions from withdrawing money.
The charges involve the Bear Stearns High-Grade Structured Credit Strategies Fund and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund.
Cioffi was senior portfolio manager and Tannin was COO for the funds.
Bear Stearns collapsed in March 2008 and was sold to JPMorgan Chase.