Bear Stearns hit by higher claims

Damages claims over the high-profile collapse of two Bear Stearns subprime mortgage hedge funds spiralled today.

Their collapse has already seen the arrests of hedge fund managers.

Now, investors taking a civil action have upped their damages claim by $500 million (£250 million) to $1.5 billion.

They are suing the bank, the two arrested managers Ralph Cioffi, 52, and Matthew Tannin, 46, and auditors Deloitte & Touche.

Cioffi and Tannin were arrested last month and accused of misleading investors about the health of the hedge funds.

An email trail forms the heart of the authorities' action against the pair. The emails indicate they were aware the investments were in trouble even as they were reassuring investors that their money was safe.

Two investors and the liquidators of two Cayman Islands funds filed an amended complaint to their earlier civil suit that sought $1 billion in damages.