Bear bankers face charges over hedge fund losses

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NEW YORK – Two former Bear Stearns bankers could face criminal charges over the collapse of two hedge funds that cost the failed bank $6 billion (£3 billion) in July 2007.

Ralf Cioffi and Matthew Tannin could be accused of misleading investors before the two funds folded due to US subprime mortgage debts. The two men could be the first high-profile bankers to stand trial in relation to the subprime crisis.

Investigators from the Department of Justice (DoJ) are reportedly interviewing key witnesses and gathering information related to the case. After the evidence is gathered, the US Attorney for New York’s eastern district, Benton Campbell, will assess if securities laws have been broken and whether to charge the men.

Tannin ran the bank’s asset management while Cioffi was responsible for the funds in question – the High Grade Strategy and Enhanced High Grade fund. After injecting $1.6 billion of capital into the funds in June 2007, the bank abandoned hope for their revival.

Both men have reportedly told friends that they had not realised the true state of the investments within the funds, but were instead coping with the general downturn in debt markets. Cioffi moved $2 million of his own money from one of the funds in March 2007.

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• Topics
• Bear Stearns
• Financial crime
• Hedge funds
• Market abuse
• Subprime
• Regulation