Federal judges -- led prominently by U.S. District Judge Jed Rakoff in Manhattan -- have quite publicly expressed highly negative sentiments in recent months concerning some of the proposed settlements that the SEC has been making with hedge fund and other securities fraud defendants.

Rakoff refuses to endorse a $285 million deal that the agency reached with Citigroup. Now one of his peers -- U.S. District Judge Frederic Block in Brooklyn's federal court -- says he is leaning toward approving a recent deal even though "it is being settled for, relatively speaking, chump change."

Block is referring to the tentative settlement just reached between the SEC and two former Bear Stearns Cos. hedge fund managers, Ralph Cioffi and Matthew Tannin. Those two men first became locked on the government's radar in 2007, when their funds collapsed and cost investors about $1.6 billion just prior to the occurrence of the broader economic crisis.

The government filed criminal and civil charges against Cioffi and Tannin, alleging that they hid key information concerning their funds' exposure to subprime assets.

The men were acquitted on the criminal charges, with the SEC-proposed settlement addressing civil liability.

Cioffi is slated to pay back $700,000 of illegal profits and incur an additional $100,000 penalty. Tannin must pay back $200,000 and is being assessed a $50,000 fine. Additionally, the settlement calls for a three-year ban from working in the securities industry on Cioffi and a two-year ban on Tannin.

Judge Block has asked the SEC for further details regarding its rationale for the settlement.

Source: Wall Street Journal, "Ex-Bear Hedge-Fund managers settle SEC charges," Jean Eaglesham, Feb. 14, 2012