This case involves a hedge fund manager who managed a hedge fund that had taken highly leveraged positions in collateralized debt obligations based on subprime mortgage-backed securities. The manager worked for a company that was one of the largest brokerages and investment banking firms on Wall Street. The firm had built its image as an industry innovator and developed an increasing focus on the bond markets. The hedge fund manager usually spoke with investors each quarter about the fund performance and market conditions. When the housing market collapsed, the hedge fund took increasing hits to the value of its portfolio and faced escalating redemptions and margin calls. As a result, the manager laid off a significant portion of his staff, including key members of the fund accounting and investor relations teams. During this transition phase, mistakes were made on the monthly performance summaries sent to investors that highlighted direct subprime exposure at about 12 to 15 percent of the fund’s portfolio. This mistake became evident after the fund collapsed when they discovered that the total subprime exposure — direct and indirect — was approximately 55 percent. The manager was indicted for fraud and conspiracy.