(RTTNews) - Ralph Cioffi and Matthew Tannin, former hedge fund managers of the erstwhile Bear Stearns Cos., were found not guilty on all six counts in the fraud trial against them, reports said Tuesday. Cioffi and Tannin ran two hedge funds that mostly comprised subprime mortgage-backed securities. The two are accused of cheating investors who lost around $1.6 billion in these funds, which collapsed in 2007.

Cioffi was the portfolio manager for the two funds and Tannin was their chief operating officer. The funds collapsed on mounting defaults and Bears Stearns itself was taken over the next year by JPMorgan Chase & Co. (JPM: News ). The government argued that Cioffi and Tannin went on seeking investors in their funds, even after knowing about its instability. They went on trial on October 13 on charges of conspiracy, securities and wire fraud.

A panel consisting eight women and four men spent about a month hearing testimony in the case, but took only nine hours to find that the two men were not guilty, reports added, noting that ''defense lawyers tore the government witnesses apart." The government's case relied heavily on e-mails written by the defendants to investors, in which they said they were putting their own money into the funds. Neither of them added any money into the funds, which collapsed a few months later.

The defense said Cioffi and Tannin were innocent of any wrongdoing and were only honestly optimistic about the funds' health. The defendents' lawyers said the e-mails under scrutiny were taken out of context. Jenny McCaughey, the jury forewoman, told Bloomberg that the e-mails presented by the government as evidence cut both ways. "They said one thing and another thing. The government didn't give us enough evidence to go on," McCaughey said.

Aram Hong, another juror, reportedly said an exhibit showed that the two were working hard, and said if it was really a fraud case, they would not have worked so hard.
Another charge leveled by the government was that Cioffi committed insider trading when he moved $2 million, which was one- third of his holdings in the funds, in March 2007 to another Bear fund that he supervised. But Hong pointed out that the money went into a Bear fund that Cioffi portfolio-managed and not into his bank account. "We never found anything beyond a reasonable doubt," said Ryan Goolsby, another juror.

Several jurors reportedly said after the verdict that the government failed to prove the defendants defrauded investors. Juror Serphaine Stimpson said they were made "scapegoats for Wall Street," Bloomberg reported. If convicted, each of the two men could have got up to 20 years in prison.

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