Bank of America has sued two former bond managers at Bear Stearns, Ralph Cioffi and Matthew Tannin, who unloaded shares in subprime mortgage instruments they personally held in bond funds just prior to those instruments losing $1 billion in value.

The lawsuit, filed in U.S. District Court in Manhattan, is the first major federal case linked to the subprime mortgage crisis. The two have already been charged with securities fraud by the Securities and Exchange Commission.

 

The lawsuit accuses Bear Stearns; Cioffi and Tannin; and Raymond McGarrigal, a former Bear Stearns senior managing director and senior portfolio manager, of “egregious misconduct” in a $4 billion collateral debt obligation transaction structured and marketed by BoA.

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