Both have been accused of misleading investors by giving the hedge funds — the High Grade Structured Credit Strategies Fund and the High Grade Structured Credit Strategies Enhanced Leverage Fund, created to invest in subprime mortgages — positive ratings when in reality they were on the brink of crashing. In a suit last year, Barclays Bank claimed that the Bear Stearns managers “hatched a plan to make more money for themselves and further to use the Enhanced Fund as a repository for risky, poor-quality investments.”
A lawyer for Tannin tells the Times he is innocent: "He is being made a scapegoat for a widespread market crisis," she said. "He looks forward to his acquittal."
The Wall Street Journal, however, reports that four days before assuring investors everything was fine, Tannin wrote an email to Cioffi in which he admitted their funds were “toast."