[JURIST] A jury US District Court for the Eastern District of New York [official website] found former Bear Stearns [corporate website] hedge fund managers Ralph Cioffi [BusinessWeek profile] and Matthew Tannin [Huffington Post profile] not guilty of federal securities-related charges Tuesday. While Cioffi alone was charged with insider trading, both men were charged with three counts of securities fraud and two counts of wire fraud in connection with the June 2007 collapse of their funds. As a result of the collapse, investors suffered nearly $1.8 billion in losses. US attorney Benton Campbell expressed disappointment [press release] with the verdict, but promised efforts to maintain the future integrity of securities markets.
The June 2008 Securities and Exchange Commission (SEC) [official website] complaint [text, PDF] alleged that Cioffi and Tannin had taken leveraged positions in financial derivatives based on subprime mortgage-based assets and then taken steps to conceal ensuing losses from investors. As the financial crisis [Federal Reserve Bank timeline] deepened, Bear Stearns filed for bankruptcy, and JP Morgan Chase acquired the firm in March 2008, causing several lawsuits [JURIST report]. The financial crisis has seen banks and Wall Street firms come under fire for the level of risk they assumed in connection to the subprime mortgage securities market. With the acquittal of Cioffi and Tannin, government prosecutors may be less likely to pursue securities fraud charges against Wall Street executives implicated in bringing about the credit crisis, despite pledging stronger enforcement [JURIST report] in July.