Two Bear Stearns Hedge Fund Managers Arrested

New York–FBI agents took former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin into custody Thursday in connection with their participation in the collapse of two funds that helped spark the subprime mortgage collapse, Bloomberg reports.The arrests–the first from a federal probe of possible fraud by banks and mortgage firms whose investments in subprime loans and securities plummeted in value–may result in the U.S. Securities and Exchange Commission filing a lawsuit today claiming the men engaged in fraud by telling investors the troubled funds they managed were safe, Bloomberg said.Tannin was Cioffi’s chief operating officer; Cioffi managed two collapsed funds, which had invested nearly all their assets in subprime-mortgage-related securities.Both defendants face up to 30 years in prison if they are convicted of conspiracy to commit securities fraud, wire fraud or mail fraud.