In a separate indictment released on Thursday, the Securities and Exchange Commission charged the same two ex-Bear Stearns fund managers with defrauding investors as the subprime mortgage market began to collapse. The civil indictment comes at the same time as the U.S. Justice Department’s criminal indictment.

The SEC charged Ralph Cioffi and Matthew Tannin with defrauding and/or deceiving investors in their hedge fund, costing investors more than $1 billion after it was all over.

If found guilty, the managers would be banned from engaging in securities transactions and would have to pay back any profits they made by allegedly hiding the hedge funds' problems from investors. The SEC is also seeking undisclosed civil damages, according to the indictment.

Like the Justice Department, the SEC alleged that Cioffi and Tannin deliberately tried to cover up the problems with their investments and attempted to pull their personal money out first before trying to recover  investors’ money.

“As the funds suffered increasing losses to their value… (Cioffi and Tannin) fraudulently concealed from (investors) the full extent of the funds’ deepening troubles,” the indictment said.

Cioffi and Tannin were the two fund managers in charge of the Bear Stearns' hedge funds which imploded last summer. Those hedge funds primarily invested in fixed-income securities, most notably subprime-mortgage backed securities.

“From late 2006 through June 2007, Cioffi became increasingly indiscriminate in the management of the funds,” the indictment said. “During that time Cioffi started by even-more-risky investments such as (Asset Backed Securities) significantly backed by subprime securities rated (below investment grade)…. Tannin noted Cioffi’s lack of buying discipline, in a February 5, 2007 e-mail saying “Unbelievable. (Cioffi) is unable to restrain himself.”

Like the Justice Department's indictment, the SEC indictment relies heavily on confiscated e-mail and conference call transcripts – some of which are not disclosed in the U.S. Justice Department’s version.  Also of note is the heavy reliance on a third undisclosed fund manager at Bear Stearns. That person has not be named or charged.