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

Q&A: Jeff Eaton Talks Capital Raising, CalPERS And The Secondaries Market

Oct 14 2014 | 10:16am ET

Global placement agent Eaton Partners has raised close to $60 billion for some of...

Lifestyle

MacDonald-Korth Offers Insights Into Paintings Bought, Sold By Hedgies

Oct 7 2014 | 9:00am ET

Definitive and complete ratings require an in-person examination of an artwork,...

Guest Contributor

PAAMCO: European Equity Exposure - Challenging Year, But All is Not Lost

Oct 16 2014 | 4:12am ET

European equity hedge fund managers have had a tough time so far this year. The...

 

Videos

Editor's Note

    Must Attend Hedge Fund Charity Events For October

    Sep 30 2014 | 9:29am ET

    The crisp Autumnal days of October are upon us, and so are a few of the hedge fund industry’s favorite charitable events. If you have never been to Rocktoberfest, well, you are missing out. And for a quieter evening of sipping and socializing, stop by HFC’s Wine Soiree. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.