Just weeks after indicting two Bear Stearns hedge fund managers for securities fraud tied to the credit crisis, The Wall Street Journal today reported that federal prosecutors are investigating the auction-rate bond market. In particular, the US Attorney’s office for the Eastern District of New York is looking at two Credit Suisse brokers and whether or not they misled investors about the assets backing the securities they purchased.
Very little about this story is surprising, given the failure of the auction-rate market in February. This is just the latest legal fallout from the credit crisis Bear Stearn’s started last June. More announcements like this are almost certain as the current economic turmoil unfolds.
The Wall Street Journal article is titled “Auction-Rate Probe Grows Over Clarity From Brokers” and appeared on July 9, 2008.