2 former Bear Stearns managers hit with first criminal charges
Two former Bear Stearns hedge fund managers were hauled into jail and charged with lying to investors about the collapse of the US subprime mortgage market.
By Agencies |
NEW YORK: Two former Bear Stearns hedge fund managers were hauled into jail and charged with lying to investors about the collapse of the US subprime mortgage market, perhaps signaling the start of a wave of prosecutions arising from the housing meltdown.
Ralph Cioffi and Matthew Tannin were accused of encouraging investors to stay in their hedge funds, heavily exposed to subprime mortgages, even as they knew the credit market was in serious trouble.
They were indicted on conspiracy and fraud counts yesterday, the first criminal charges to hit Wall Street in the housing market meltdown.
The eventual implosion of their two hedge funds cost investors USD 1.8 bn and started the domino effect that led the demise of Bear Stearns itself, which barely avoided bankruptcy in a rescue buyout by JP Morgan Chase & Co.
"This is not about mismanagement of a hedge fund," Mark Mershon, head of the New York FBI office, told reporters. "It is about premeditated lies to investors and lenders."
The arrests came as the Justice Department in Washington announced the indictments of more than 400 players in the real-estate industry since March in a crackdown on mortgage fraud. Sixty were arrested on Wednesday alone.
That alleged fraud includes misstatement of income or assets, forged documents, inflated appraisals and misrepresentation of a buyer's intent to occupy a property as a primary residence.
The Bear Stearns case against Cioffi and Tannin appears to be based heavily on a series of e-mails that reveal panic and disorder behind the scenes at the hedge fund as its investments began to slide.
Ralph Cioffi and Matthew Tannin were accused of encouraging investors to stay in their hedge funds, heavily exposed to subprime mortgages, even as they knew the credit market was in serious trouble.
They were indicted on conspiracy and fraud counts yesterday, the first criminal charges to hit Wall Street in the housing market meltdown.
The eventual implosion of their two hedge funds cost investors USD 1.8 bn and started the domino effect that led the demise of Bear Stearns itself, which barely avoided bankruptcy in a rescue buyout by JP Morgan Chase & Co.
"This is not about mismanagement of a hedge fund," Mark Mershon, head of the New York FBI office, told reporters. "It is about premeditated lies to investors and lenders."
The arrests came as the Justice Department in Washington announced the indictments of more than 400 players in the real-estate industry since March in a crackdown on mortgage fraud. Sixty were arrested on Wednesday alone.
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That alleged fraud includes misstatement of income or assets, forged documents, inflated appraisals and misrepresentation of a buyer's intent to occupy a property as a primary residence.
The Bear Stearns case against Cioffi and Tannin appears to be based heavily on a series of e-mails that reveal panic and disorder behind the scenes at the hedge fund as its investments began to slide.
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