In a huge setback for government prosecutors, a jury in New York City last night acquitted two former hedge-fund managers with Bear Stearns of lying to clients about the safety of their money even when they themselves allegedly saw disaster around the corner because of the imploding sub-prime mortgage market.
Matthew Tannin and his former boss Ralph Cioffi walked out of the courthouse free men after a trial that lasted just under a month. It had been billed as the first attempt by the authorities to lay some criminal responsibility on someone on Wall Street for the financial meltdown that caused havoc around the globe.
The two men had both faced charges of securities and wire fraud, while Mr Cioffi had also been charged with insider trading. In the end, a mostly working-class jury did not buy the prosecutors' case that the two fund managers' actions in 2007 amounted to criminal activity. It acquitted them after six hours of deliberation. Defence lawyers had argued that emails submitted by the prosecution had been taken out of context.
It is likely that the result will put a chill on criminal investigations under way in connection with the collapse of Lehman Brothers and the US government bailout of insurance giant AIG.
The verdicts demonstrate the difficulty the government will face in trying to define the difference between casual greed and incompetence on Wall Street on the one hand, and outright criminal fraud. "Of course we are disappointed by the outcome in this case," conceded Robert Nardoza, a US Attorney who headed the prosecution case. "But the jurors have spoken."