A Brooklyn jury on Tuesday found two Bear Stearns hedge fund managers not guilty on charges of lying to investors about the health of two real estate-related funds that collapsed in 2007 and cost investors $1.6 billion. The verdict constitutes a major defeat for the office of the Eastern District U.S. Attorney Benton J. Campbell. Many analysts considered the case, the largest subprime-related criminal action to go to trial thus far, a possible harbinger for future actions against fund managers, as well as a test of the viability of Brooklyn as a venue for financial fraud actions.
Ralph Cioffi, 53, and Matthew Tannin, 47, faced six and five counts, respectively, including securities and wire fraud for lying to investors. Specifically, the defendants were accused of telling investors that they were continuing to increase their own investments in the two beleaguered funds and that other investors were not making substantial withdrawals.
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