Ralph Cioffi and Matthew Tannin, hedge fund managers at investment bank Bear Stearns, were acquitted of charges relating to alleged securities fraud. in June 2008, Cioffi and Tannin were arrested and processed at Federal Bureau of Investigation (FBI) headquarters in Manhattan. As HousingWire previously reported, the two Bear Stearns funds managed by both men — the High-Grade Structured Credit Strategies Fund and High-Grade Structured Credit Strategies Enhanced Leverage Fund — were the first two major hedge funds to implode at the onset of the mortgage crisis still being worked through. The Enhanced Leverage Fund, for example, borrowed as much as $10 for every $1 held in cash or collateral, according to Street Fighters, an investigative look into the fall of Bear Stearns, authored by Kate Kelly and reviewed by HousingWire in the August magazine issue. Kelly indicates that, when lending firms, including JP Morgan Chase (JPM), made margin calls on the funds, the liquidity troubles were revealed and the managers went into default. Cioffi and Tannin then pursued a fire sale of at least $8bn of bonds. But it was not enough to keep the funds solvent. The mortgage-related funds’ trouble in June 2007 were the first in a series of difficulties that helped push Bear Stearns to the brink of insolvency, leading to its arranged bailout negotiated by JP Morgan and the Federal Reserve in May 2008. But a jury this week affirmed Cioffi’s and Tannin’s innocence of alleged securities fraud that was said to contribute to the funds’ difficulties and — ultimately — Bear Stearns’ downfall. A statement from US attorney Benton Campbell iterated the Department of Justice‘s disappointment in the outcome of the long case. “Honesty and integrity are the principles upon which our financial markets function,” Benton said. “Enforcing and protecting those principles will continue to be one of the principal efforts of this Office.” Write to Diana Golobay.