The two men, who ran hedge funds that collapsed after betting heavily on the subprime mortgage market, were being accused of lying to investors in an alleged scheme that cost 300 investors about $1.6 billion and nearly caused the demise of Bear Stearns itself. The firm narrowly avoided bankruptcy in a rescue buyout by JPMorgan Chase & Co. Officially, Cioffi and Tannin were charged with three counts of securities fraud and two counts of wire fraud, with Cioffi also being charged with insider trading.
For the government's campaign to punish frauds exposed by the financial crisis, the acquittal is a defeat. Some jurors told reporters after the verdict that they felt the pair was being blamed for market forces beyond their control.
In a statement, U.S. Attorney Benton Campbell said, "We are disappointed by the outcome in this case, but the jurors have spoken and we accept their verdict."
Prosecutors relied on a series of emails that they alleged were evidence of a behind-the-scenes alarm at the hedge funds as investments in high-risk, complex securities linked to the subprime market began to fall. As the situation became more severe, Cioffi pulled $2 million of his own cash from the fund but, along with Tannin, told investors that they should stay in and the outlook was good.
Tannin left the courtroom without comment. His attorney, Susan Brune, said, "We are thrilled for Matt and for his family." Cioffi said only, "I'm happy."
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