Ralph Cioffi and Matthew Tannin, former Bear Stearns headge fund managers, are the first two criminal indictment casualties of the subprime crisis, with the FBI having arrested them at their homes on Thursday.

The U.S. Attorney General's Brooklyn Office and the Securities and Exchange Commission have also charged the two with securities fraud, having found evidence that Cioffi and Tannin expressed concern over weakness in the secondary mortgage market to colleagues at Bear Stearns, all the while touting its resilience to investors who ultimately lost $1.6 billion in the two Bear Stearns funds.

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