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Tuesday, December 18, 2007

Bear Stearns Hedge Fund Insider Trading Inquiry

The inquiry by Federal criminal prosecutors into whether insiders withdrew money from the collapsed Bear Stearns hedge funds was reported nationally this morning. The Feds are looking into the actions of the fund’s head manager Ralph Cioffi. People close to the investigation are saying he moved nearly $2 million from the funds just weeks before they imploded into insolvency.

Also investigation insiders are saying that Cioffi was touting the funds to investors and prospective investors while at the same time pulling his own money out. If the allegations are indeed true, then this is a situation reminiscent of Sam Waxal, the disgraced former CEO of Imclone, whose actions led to his imprisonment of seven years and Martha Stewart’s conviction and incarceration.

Insiders should never be granted preferential treatment and if the Feds’ inquiry uncovers evidence it could certainly help my clients and other investors who have filed claims against Bear Stearns.

The report of potential insider trading at Bear Stearns ironically was followed by a report from the General Accounting Office that criticized the SEC and FINRA for their record on insider trading. Under such pressure, you can be sure regulators and investigators will take the Bear Stearns inquiry very seriously.


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