|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
Probe of Insider Trading at Bear Stearns, Federal investigators are examining whether some insiders pulled money out of Bear's troubled hedge funds, while others were blocked from doing so
Matthew Goldstein and David Henry
BusinessWeek. December 17, 2007
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EXCERPT: The investigation by securities regulators and federal prosecutors into this summer's collapse of two Bear Stearns (BSC) hedge funds that invested in risky securities backed by subprime mortgages is heating up. BusinessWeek has learned the Securities & Exchange Commission and the U.S. Attorney's office in Brooklyn are looking into an allegation that at least one Bear Stearns insider associated with the funds may have been pulling his personal money out of the investment vehicles this spring when the market was in turmoil. The alleged redemptions occurred, sources say, during a time the funds' managers were urging other investors to stay put. The Wall Street Journal subsequently reported that Ralph Cioffi is the manager drawing scrutiny, after moving $2 million of his $6 million investment in the funds into another Bear-managed hedge fund. BusinessWeek has learned the other Bear fund in question is the $228 million Bear Stearns Structured Risk Partners fund. People familiar with the probe say investigators have been reaching out to investors in the highly leveraged funds, seeking information about the comments the funds' managers made during the spring with regard to the issue of redemptions, as well as the funds' exposure to the subprime mortgage market. The funds once controlled nearly $35 billion in collateralized debt obligations and other mortgage-backed securities, and investors lost a combined $1.6 billion when the funds filed for bankruptcy in July. Lawyers for the funds' top managers, Cioffi and Matthew Tannin, either declined to comment on the investigation or did not return phone calls seeking comment. A Bear spokesman did not return a telephone call and an e-mail seeking comment. John Nestor, an SEC spokesman, says, "It's our policy to neither confirm nor deny investigations." A spokesman for Eastern District of New York U.S. Attorney Benton Campbell declined to comment. |
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