Bear Stearns Faces Indictment Over Collapsed Hedge Funds

Feb 7 2008 | 1:04pm ET

Bear Stearns may be in serious legal jeopardy over the collapse of two credit hedge funds last year.

Already facing hundreds of millions in claims from aggrieved investors, who lost $1.6 billion in the High-Grade Structured Credit Fund and a more levered sister vehicle, the Wall Street firm is now facing the prospect of a federal indictment.

Federal prosecutors are in talks with high-ranking Bear executives, CNBC’s Charlie Gasparino reports, and have already spoken with Rich Marin, the former head of Bear Stearns Asset Management. According to Gasparino, an indictment of the firm is possible.

The two Bear funds went bankrupt last year after huge losses in subprime mortgage-linked bonds and other credit assets.

In December, the Securities and Exchange Commission announced it was investigating the withdrawal of $2 million from the funds by former manager, Ralph Cioffi, who has since left the firm.

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