Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, June 22, 2012

Judge Approves "Chump Change" Settlement with Two Former Bear Fund Managers

Judge Frederic Block, Senior Judge on the federal district court in E.D.N.Y., recently approved, with reluctance, an SEC consent judgment with former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin for "chump change," because the SEC persuaded him that its power to recover losses for investors was limited.  SEC v. Cioffi (E.D.N.Y. 6/18/12)(Download Cioffi.061812[1])

Cioffi and Tannin were managers of two Bear Stearns hedge funds that collapsed in 2007.  The government brought criminal securities fraud changes against the men; a jury acquitted them in 2009.  The SEC persisted in its civil action and earlier this year presented a proposed consent decree for judicial approval.  It would require Cioffi to pay $800,000 and Tannin $250,000 as well as impose industry bars for three and two years, respectively. 

Noting that investors' losses amounted to approximately $1.6 billion, the judge initially questioned the adequacy of the settlement.  The SEC persuaded the court, however, that the agency had limited power to recoup investors' losses, since it was limited to seeking disgorgement of profits.  The judge also expressed concern over the obstacles Congress had placed on private litigation in the PSLRA.  The judge reluctantly approved the settlement and invited Congress to consider whether the government should do more to aid victims of securities fraud.

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