NEW YORK — In the first criminal case to target Wall Street figures associated with the subprime mortgage meltdown, prosecutors have accused two former Bear Stearns hedge fund managers of conspiracy and fraud.

In a federal indictment unsealed yesterday in Brooklyn, prosecutors alleged that Ralph Cioffi, 52, and Matthew Tannin, 46, deceived high-end investors in two Bear Stearns hedge funds that were heavily weighted with subprime mortgages.

According to the 27-page indictment, when subprime mortgage problems started driving the value of the Bear Stearns hedge funds down last year, the pair hid the truth from investors and even said it was a good time to put more money in the funds.

Cioffi was also charged with one count of inside trading, for moving $2 million of his own money out of the funds last year without disclosing that fact to investors. Cioffi and Tannin pleaded not guilty.

In building their case, prosecutors relied heavily on e-mails between the men and their colleagues, as well as statements made to investors from March to June of 2007.

On March 2, according to the indictment, Cioffi drank a toast with members of his portfolio management team to celebrate surviving a difficult month. But as the meeting ended, he allegedly told his team members not to tell anyone how difficult February had been.

In the next few weeks, the complaint says, Cioffi and Tannin talked up their funds to their salesmen, saying it was a great buying opportunity for investors. Tannin told a customer that he was putting more of his own money into the funds, but prosecutors say he never did.

Cioffi went even further, prosecutors say, moving $2 million of the $6 million total he had invested in his funds into a different Bear Stearns fund that was posting healthy returns, without notifying other investors.

When investors began expressing concern about the funds in April, the pair glossed over concerns about subprime mortgages, assuring them the market was not going to turn into "one big disaster," the indictment says.

Cioffi's attorney, Ed Little, and Tannin's lawyer, Susan Brune, said their clients were being blamed for larger problems in the mortgage market last year.