The managers of two Bear Stearns hedge funds that collapsed late last year could be charged in a criminal indictment led by federal prosecutors.

The Wall Street Journal reports this morning that the U.S. Attorney's office in Brooklyn is preparing to file criminal charges against Ralph Cioffi and Matthew Tannin. The two ran the High-Grade Structured Credit Strategies Fund and Structured Risk Partners Fund.

When those funds imploded in June 2007, they took with it about $1.6 billion in investors' money. This event essentially set off panic over the subprime mortgage crisis and, eventually, led to the run that toppled Bear Stearns, now part of JPMorgan Chase.

Cioffi and Tannin, employees of Bear Stearns Asset Management, could face securities fraud charges in the coming week, the report states.

Reportedly, Cioffi withdrew about $2 million of his own money from the High-Grade fund in March 2007. And as the market deteriorated, the two managers allegedly continued to tell fund investors that market events were unlikely to have adverse impact and allegedly refused redemption requests. Finally, on July 31, 2007 the two funds filed for bankruptcy protection.

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