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First Major Financial Crisis Trial Begins

Bear Stearns execs accused of lying as funds imploded

By Rob Quinn, Newser Staff

Posted Oct 15, 2009 2:43 AM CDT

(Newser) – The first major criminal trial against top Wall Street execs involved in the financial crisis kicked off in New York yesterday. Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin are accused of misleading investors in a desperate attempt to stop them from abandoning the funds, even as they themselves yanked their money out and admitted the subprime market is "toast" in personal emails. The collapse of the fund cost investors $1.6 billion.

"These two defendants lied to their investors to save their multimillion-dollar bonuses," an assistant US attorney told jurors. "In the United States of America that’s a crime and it’s called securities fraud." The pair—who face up to 20 years in jail if convicted—are accused of chicanery during the financial crisis but not of actually causing it, the Independent notes, although that distinction may matter little to jurors likely to be hungry for payback after the economic misery of the last two years. "This is not a revenge opportunity," the judge cautioned them.

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Former Bear Stearns hedge fund manager Matthew Tannin enters Brooklyn federal court yesterday. (AP Photo/ Louis Lanzano)

Former Bear Stearns hedge fund manager Ralph Cioffi enters Brooklyn federal court yesterday. (AP Photo/ Louis Lanzano)

Former Bear Stearns hedge fund manager Ralph Cioffi, center, enters Brooklyn federal court yesterday. (AP Photo/ Louis Lanzano)

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They decided to lie to their investors to buy more time, waiting for the market to come back again. But by lying to their investors, they stole from them an opportunity to make other investments. - Assistant US Attorney Patrick Sinclair

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First Major Financial Crisis Trial Begins