Fed Hunters Bag Two Bears

Updated from 2:56 p.m. EDT

Federal authorities on Thursday charged two former Bear Stearns fund managers with conspiracy and fraud charges, part of a broad federal crackdown on the mortgage market that includes 144 cases related to individual loans.

The Securities and Exchange Commission and the U.S. Attorney's office filed charges against Matthew Tannin and Ralph Cioffi, the Bear managers, accusing them of misleading investors and institutions they traded with about the extent of the losses in their portfolio. Cioffi has also been charged with insider trading. The Bear Stearns fund managers caused about $1.4 billion in losses, an FBI press release says.

"Operation Malicious Mortgage," targeting individual mortgage fraud, encompasses a three-and-a-half month investigation involving several federal agencies. The Federal Bureau of Investigation estimates that the 144 individual cases, which have resulted in charges against 406 defendants across the country, have led to $1 billion in losses.

"The FBI will continue to direct investigative and analytic resources towards mortgage fraud and corporate securities fraud that threaten our nation's economy," said FBI Director Robert Mueller, in the press release.

Cramer: Bear Arrest Could Scare Hedge Funds Straight

Tannin was arrested outside his home in New Jersey Thursday morning and Cioffi was taken into custody in New York City, according to the Associated Press.

The SEC's complaint against Cioffi and Tannin states that the two executives made several misrepresentations to investors, who relied on them as their only sources for information on the funds' subprime exposure, margin calls and redemption requests, among other matters.