14 Oct 2009

Ex-hedge fund managers go on trial in New York

7:54 am on 14 October 2009

The trial of two former hedge fund managers at the investment bank Bear Stearns has opened in New York.

The hedge funds, which collapsed in June 2007, bet on the high-risk sub-prime mortgage market in the United States before they collapsed.

The BBC reports Ralph Cioffi and Matthew Tannin are accused of misleading investors about the health of their fund.

They are among the first financial executives to face criminal charges since the international financial crisis began almost two years ago.

They deny accusations that they knew of the funds' problems but did not inform investors, who lost $US1.4 billion.

The BBC reports the funds were marketed as low risk, but were backed by subprime mortgages.

Problems in the sub-prime market triggered a massive loss of confidence in financial markets.

Proceedings in a federal court in Brooklyn began on Tuesday with the selection of the jury getting underway. Opening arguments are expected later in the week.