A federal securities fraud investigation could result in criminal charges as early as today against two former Bear Stearns executives suspected of misleading investors about the risky subprime mortgage market, an official said.

A law enforcement official on Wednesday confirmed reports that Ralph Cioffi and Matthew Tannin, both ex-managers of Bear Stearns Cos. hedge funds that collapsed last year, have been the target of the year-long probe by federal prosecutors in Brooklyn.

The official, who spoke on condition of anonymity because the outcome of the investigation is pending, said an indictment naming Cioffi and Tannin could be announced sometime today.

The United States attorney's office and the FBI declined comment Wednesday, as did a lawyer for Tannin. Cioffi's attorney did not immediately respond to a phone message.

Prominent figures

The former Bear Stearns managers are among the most prominent figures to face criminal charges in the wake of the collapse of the subprime mortgage market.

The fallout has rattled the global economy and the American housing market.

The implosion of the hedge funds also foreshadowed Bear Stearns' own demise, with the Federal Reserve having to intervene earlier this year to bail out the beleaguered bank.

The funds' collapse also fueled the recent credit crisis by showing how much damage the slumping mortgage market could incur on the companies that bought, repackaged and sold the loans.

Despite positive assessments by Cioffi and Tannin, the Bear Stearns hedge funds failed in June 2007. The funds had more than $20 billion in assets before crashing.

Cioffi, 52, and Tannin, 46, already have been named in lawsuits brought last year by hedge fund investors, including Barclays Bank PLC, who allege they were purposely misled.

Barclays accused Bear Stearns of knowing for months that certain assets in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund were worth "far less" than their stated values.

The bank alleged Bear Stearns managers "hatched a plan to make more money for themselves and further to use the Enhanced Fund as a repository for risky, poor-quality investments".

Enhanced fund

The complaint said Bear Stearns told Barclays that the enhanced fund was up almost six per cent through June 2007 - when, "in reality, the portfolio's asset values were plummeting".

Last month, Bear Stearns shareholders approved the investment bank's sale to JPMorgan Chase & Co for US$2.2 billion, or about US$10 a share.

Back in January 2007, before mortgage defaults began clobbering banks and draining demand from the debt markets, Bear Stearns shares had traded at US$171.