BearStearns_logo.jpgThe Bear Sterns saga seems to be endless. Yesterday federal authorities arrested two former Bear Stearns managers at their homes. According to the media, the two ex-colleagues are linked to securities fraud and other charges surrounding the collapse of a hedge fund.

Matthew Tannin and Ralph Cioffi, former senior managers of two hedge funds, are suspected of providing untrue facts for investors about the risky subprime mortgage market, the authorities said.

"Cioffi's clandestine redemption caused the Enhanced Leverage Fund to pay out $2 million at a time when the markets were weak and the fund was facing another month of losses, as well as escalating margin calls and forced sales," the SEC said.

"Although Cioffi had lost faith in the funds, as evidenced by his own redemption from the Enhanced Leverage Fund, he nonetheless falsely expressed his supposed confidence in the funds, encouraging investors to add money to the funds and attempting to dissuade them from redeeming," the SEC complaint noted.

Cioffi and Tannin promoted their funds as a buying opportunity. "We have an awesome opportunity," Cioffi told a Bear Stearns broker whose clients had invested in the funds.

Reference

http://www.bloomberg.com/apps/news?pid=20601087&sid=aLXhIy_eBZhc&refer=home
http://uk.reuters.com/article/bankingfinancial-SP/idUKN1948306520080619