Prosecutors and hedge funds rarely face off in court. After all, if you can afford to invest in a hedge fund, the prevailing wisdom is that you are on your own. Investor, beware.

Hedge funds need to think again. That is the message being sent by federal prosecutors in Brooklyn, who today unsealed an indictment against two former Bear Stearns hedge fund managers, Ralph Cioffi and Matthew Tannin. It accuses them of securities and wire fraud charges stemming from the collapse of two hedge funds that had invested heavily in pools of securities backed by subprime-mortgage debt.

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The indictment paints a picture of lying and greed—basic securities fraud. But the music of the news conference outlining these charges was something more ambitious—and potentially ominous for the hedge fund industry.

Listen to Benton Campbell, the United States attorney in Brooklyn: "Hedge fund investors, like investors in publicly traded corporations or mutual funds, are protected by the federal securities laws. Honesty and integrity are the foundations on which our financial markets function. Hedge fund investors, like all investors in the securities markets, are entitled to rely on those to whom they entrust their money. Defendants chose to breach that trust, and today, they are being held to account."

Hedge fund investors are like all other investors? Say again? These investments for the very wealthy and sophisticated are virtually unregulated as a result. Now Campbell has drawn a line in the sand.

This challenge to the hedge fund world is all the more resonant because it comes from federal prosecutors in Brooklyn, who in the past have taken a back seat on white-collar crime cases to their prosecutorial counterparts in Manhattan.

Both men, who have been charged with nine counts of conspiracy, securities fraud, and wire fraud, pleaded not guilty. F.B.I. agents arrested them early this morning outside their homes. Their lawyers have said that their clients are being made scapegoats for the subprime crisis.

Can prosecutors persuade a jury? Or are they trying to make Wall Street bravado—and incompetence—a crime?