The US government is close to bringing the first criminal charges against Wall Street executives in relation to the credit crunch as Brooklyn-based prosecutors prepare to indict Ralph Cioffi and Matthew Tanin, two former Bear Stearns’ hedge fund managers.

It is understood that Mr Cioffi and Mr Tanin, who managed two hedge funds for Bear Stearn, the Wall Street bank that was this year rescued from collapse by JP Morgan Chase,could be charged as early as this week.

The US Attorney’s office in Brooklyn is thought to be preparing charges that centre on two allegations: whether they deliberately mislead investors about the funds’ health and whether they intentionally overstated the value of their assets.

The case against the two former Bear Stearns managers is part of a much broader federal investigation, part of which includes a collaboration with the FBI, which is looking for cases of insider trading. Bear Stearns as a firm, however, is not expected to be charged in the investigation.

If the charges are made against the two men, it would be the first time that the federal government has indicted any Wall Street executive in relation to the fallout from the US sub-prime mortgage crisis.

Any indictment would send a chill down the spines of other senior Wall Street executives whose companies have suffered severe losses as a result of the credit crunch.

The two hedge funds that Mr Cioffi and Mr Tanin ran became the first high-profile casualties of the credit crunch as they melted down last summer, at a cost to its investors of about $1.6 billion.

The implosion, in June 2007, came just a few weeks after the two men had given a positive outlook to investors.

The US Attorney’s office declined to comment on the case, as did JPMorgan and Bear Stearns. Mr Cioffi and Mr Tanin could not be reached to comment.

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