The odd thing about former hedge fund manager Ralph’s Cioffi’s departure from Bear Stearns isn’t that it has happened, but that it is taking place now. The decision to keep him on as an advisor was inexplicable, unless there was some convoluted legal reasoning, for example, that keeping him in the Bear tent would lead to greater cooperation and assistance with the expected litigation (the official reason was so that he could assist in the unwinding of the investments).
As we noted before, while this looks bad, it may have been permissible under the firm’s offering agreement, and people close to the situation claim that Cioffi withdrew the cash before the funds got in trouble. I’m sure the Feds are working up a timeline on that very issue.
Bear Stearns Cos. hedge fund manager Ralph Cioffi left the firm amid an investigation by U.S. prosecutors into whether he improperly pulled his money from two funds before they collapsed in July.
Cioffi, 51, ceased to be an employee last week, Bear Stearns spokeswoman Elizabeth Ventura said in an interview today. She declined to say why he left or to comment on the federal probe. He had stayed on as an adviser to the New York- based securities firm after being relieved of his duties as a fund manager in June, when his funds’ subprime mortgage investments began to unravel….
The U.S. Attorney in Brooklyn and the U.S. Securities and Exchange Commission are investigating Cioffi’s withdrawal of some of his own money from the funds, three people with knowledge of the matter said. The probe is part of a broader regulatory review of the funds’ implosion, according to the people, who declined to be identified because the examination isn’t public. Investors in the two funds, which filed for bankruptcy in July, lost $1.6 billion of capital.
The Wall Street Journal reported the probe of Cioffi earlier today.
Cioffi pulled $2 million of his own money, one third of the amount he’d invested in one of his funds, before March so he could commit it to another fund he set up, one of the people said. The withdrawal occurred before the funds ran into trouble, the person said