Bear Stearns Defendants Walk

The score is Wall Street 2, U.S. prosecutors, 0.

In the first major case stemming from the subprime meltdown, two Bear Stearns hedge fund hotshots walked Tuesday after a jury acquitted them of fraud charges stemming from their trades in mortgage-backed securities.

The two men, Ralph Cioffi and Matthew Tanning were accused of lying to investors by professing optimism about their funds while privately worrying those same funds were tanking. The funds cratered in 2007, an opening act in the collapse of the mortgage market that brought down Bear Stearns and Lehman Brothers and left other investment banks lining up for handouts from Uncle Sam.

This is the first verdict from a major case involving the players and issues that led to last year's Wall Street meltdown, and it was a blow to the government when a jury in federal court in Brooklyn acquitted the two men.

The jury of eight women and four men, after looking through documents loaded down with financial jargon, and emails the government contended Cioffi and Tannin knew their investments were in trouble, but kept flogging them to investors any way.

Jurors told the New York Times that the men's salesmanship didn't cross over into the territory of fraud.

“There was a reasonable doubt on every charge. We just didn’t feel that the case had been proven,” Ryan Goolsby, one of the jurors, told the Times.

SEC civil charges are still pending against Cioffi and Tannin.