Former Bear Stearns Fund Managers Arrested by FBI

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Bear Stearns Cos. former hedge fund managers Ralph Cioffi and Matthew Tannin were taken into custody at their homes this morning over their roles in the collapse of two funds that ignited the subprime mortgage crisis last year.

The arrests are the first from a federal probe of possible fraud by banks and mortgage firms whose investments in subprime loans and securities plunged in value, causing losses that now total $396.6 billion. The U.S. Securities and Exchange Commission may sue the two men as early as today, claiming they committed fraud by falsely telling investors the funds they managed were sound, people with knowledge of the case said.

Cioffi, 52, was arrested at his Tenafly, New Jersey, home and Tannin, 46, at his Manhattan apartment, said James Margolin, a spokesman for the Federal Bureau of Investigation's New York office.

...

Cioffi's lawyer attacked the arrests as an effort by the government to make an example of innocent men.

"Because his funds were the first to lose might make him an easy target but doesn't mean he did anything wrong,'' said Edward Little, Cioffi's lawyer, in a statement. "Cioffi had no motive to do anything wrong. He did not and could not have profited by doing anything the government now claims he did.''

Susan Brune, a lawyer for Tannin, also said her client is innocent and that he "is being made a scapegoat for a widespread market crisis.''

SEC spokesman John Nester declined to comment.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

[almaty 19]

a good start