Fed Arrests Two Former Bear Stearns Executives

June 19, 2008 12:40 p.m. EST

New York, NY (AHN) - Two former Bear Stearns Cos. hedge fund managers have been detained in New York in the wake of the collapse of the firm last year.

The federal authorities said Thursday that they have arrested Ralph Cioffi and Matthew Tannin who will face charges related to the fall-out of the firm's hedge funds led by the sub-prime mortgage market in summer 2007.

The near collapse of the Bear Stearns forced the company shareholders to vote on the most historic deal approving the sale of the company to J.P. Morgan Chase & Co.

Bear Stearns, which officially became a part of J.P. Morgan by Friday, was sold for around $1 billion offered by the investment house

The deal to sell the 85-year old brokerage, which had a stock-market value of $20 billion in January 2007, was engineered in March by the Federal Reserve of New York and Treasury Department.

The decision was made to avoid a collapse of the company, which some market analysts dreaded to create a financial tsunami and damage to the broader American financial system.

Meanwhile, the indictments against two former hedge fund managers for fraud and conspiracy will be revealed at 1:15 p.m. ET Thursday in Brooklyn, the United States Attorney for the Eastern District of New York and the Federal Bureau of Investigation-New York Division said.

If charged, the two former executives will be the first top Wall Street officials to be indicted related to the subprime-mortgage crisis that rattled global markets last year and forced more than $350 billion in writedowns so far.