Bear Fraud Probe Grows To Banks, Lenders

Oct 8 2008 | 8:39am ET

Bear Stearns may be no more, but the federal investigation into the collapse of two of its hedge funds is alive and well, and growing.

Federal prosecutors in Brooklyn, N.Y.—who are prosecuting the hedge funds’ former managers for fraud—along with the Federal Bureau of Investigation, have expanded the probe to the activities of banks and lenders to the High-Grade Structured Credit Fund and a more highly-levered sister fund, to determine if those institutions, along with the fund’s investors, were also defrauded. They are also looking at private financial memoranda to see if the firm defrauded wealthy investors.

Last month, federal prosecutors said during a court hearing that they expect to bring additional charges against Ralph Cioffi and Matthew Tannin in December. The two are accused of misleading investors about the condition of the two hedge funds, which had heavy exposure to subprime mortgage-backed securities. Both men faces decades in prison if they are convicted.

One of the potentially defrauded banks in question is Barclays, which has already sued Bear over losses in the hedge funds. In the Securities and Exchange Commission’s wider civil case against Cioffi and Tannin, filed at the same time as their criminal indictments, the agency accuses the two of using “Bank No. 1”—reportedly Barclays—to lever its investments.

Cioffi and Tannin have proclaimed their innocence.


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

Versum Materials (VSM), with a market capitalization of $2.7 billion, enables chipmakers to achieve higher performance at lower cost with enhanced reliability. Versum is a leading global provider of electronic materials for the integrated circuit and flat-panel display markets.