The criminal trial of two former Bear Stearns executives, Ralph Cioffi and Matthew Tannin, ended with a not guilty verdict on all charges Tuesday.
The high flying money managers were charged with securities fraud and would have faced 20 years in prison if convicted.
A jury in U.S. District Court in Brooklyn, N.Y., reached its verdict in the month-long trial of the hedge fund managers after less than six hours of deliberations.
"Of course, we are disappointed by the outcome in this case, but the jurors have spoken, and we accept their verdict," Benton J. Campbell, the prosecutor handling the case, said in a written statement.
In a 28-page indictment of 53-year-old Cioffi and 47-year-old Tannin, the government alleged that both men knew their hedge funds were "at risk of collapse" but "rather than disclosing the true state of the Funds ... agreed to make misrepresentations in the ultimately futile hope that the Funds' bleak prospects would change."
Those prospects didn't change. The two hedge funds in question were heavily invested in subprime mortgages and eventually lost 100 percent of their value, resulting in a loss to investors of more than a billion dollars.
The alleged false statements and misrepresentations, according to the government, included Tannin telling investors in March 2007 that he was going to add more of his own money to the fund -- although he never did.
That false statement encouraged investors to put more money into the fund, according to the indictment, which also alleges that Cioffi never told investors that he was actually transferring $2 million of his own money out of the fund.
In addition, the government alleged that Tannin and Cioffi circumvented the Bear Stearns' e-mail system by using their own personal e-mail accounts and those of their wives.
Bear Stearns Case Tied to Mortgage Meltdown
On April 22, according to the indictment, Tannin recommended in an e-mail to Cioffi that they close the funds. "If we believe the [collateralized debt obligation's report is] ANYWHERE CLOSE to accurate I think we should close the funds now," he allegedly wrote.
And yet both men continued to tell senior Bear Stearns personnel and investors that the Funds "were in good shape and would continue to be successful," the indictment said.
The case captured the headlines in part because it is intimately tied to the financial crisis and the mortgage meltdown and because investor outrage still runs high.
But David Siegal, a former prosecutor and currently a partner with the law firm Haynes and Boone, cautioned that the trial may not have the wide-ranging implications many believe.
"This is not an indictment of Bear Stearns," he said. "This is a narrow case about two fund managers specifically relating to what they said to investors and others and about whether or not they had criminal intent."
During the trial, defense attorneys for Cioffi and Tannin argued that the prosecution overreached by making the case an allegory for all that was wrong on Wall Street.
With reports from ABC News' Richard Esposito.