A federal judge Frederic Block in Brooklyn, New York rejected former Bear Stearns Cos., once the fifth-largest US securities firm, hedge fund manager Ralph Cioffi’s bid to dismiss an insider trading charge on the grounds that he didn’t owe a duty to his clients.
U.S. District Judge Frederic Block today denied a request by defense lawyers Dane Butswinkas and R. Hackney Wiegmann to throw out a claim by prosecutors that Cioffi withdrew $2 million of his own money just before one of the funds he managed collapsed, Bloomberg reported.
Cioffi, 53, and another former manager, Matthew Tannin, 47, were accused in an indictment of misleading investors about the health of two hedge funds that failed in July 2007, costing investors $1.6 billion. The implosion helped trigger the credit crunch and the eventual collapse and sale of Bear Stearns to JPMorgan Chase & Co.
Former fund managers Cioffi and Matthew Tannin are set to go on trial in September on criminal charges that they defrauded investors at two mortgage-linked funds that collapsed in 2007.
The 2007 collapse of the High Grade Structured Credit Strategies Master Fund and the Enhanced Master Fund, was one of the first signs of major financial trouble at Bear Stearns, which was sold to JPMorgan Chase & Co in an emergency deal brokered by the U.S. Federal Reserve in March 2008.
