Former Bear Stearns Cos. hedge fund managers Ralph Cioffi and Matthew Tannin, indicted for fraud and conspiracy last month in the first case stemming from a federal probe of the mortgage-market collapse, may face more charges.
The two men were accused June 19 of misleading investors about the health of two hedge funds that failed last year. The implosion helped trigger the credit crunch and the eventual collapse and sale of Bear Stearns to JPMorgan Chase & Co.
"The government is indeed contemplating additional charges,'' Assistant U.S. Attorney Patrick Sinclair said at a preliminary hearing July 18 in Brooklyn, New York, federal court, adding that any new counts would be added by "early fall.''
Sinclair declined to say what charges are being considered.
The government has been investigating possible fraud by banks and mortgage firms whose investments in subprime loans and securities plunged in value, causing losses that now total almost $450 billion. Cioffi and Tannin have also been sued by the U.S.
Securities and Exchange Commission.
At the hearing, the men made their initial appearance before U.S. District Judge Frederic Block, who would preside over any trial. Brooklyn U.S. Attorney Benton Campbell has said the investigation is continuing.
Cioffi managed the two funds that collapsed, and Tannin served as his chief operating officer. The funds, which put most of their assets in subprime mortgage-related securities, failed in June 2007 when prices for collateralized-debt obligations linked to home loans fell amid rising late payments by borrowers with poor credit or heavy debt.
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