The liquidator of the two Bear Stearns hedge funds that collapsed last July has filed a lawsuit against the bank and Deloitte & Cooper, the funds' auditor, seeking to recover $1bn (€1.6bn) in losses.

The suit accuses Bear Stearns of marketing the funds as viable while they knew they were vulnerable to even a slight downturn in the US housing market, according to newswire Reuters. The funds invested in asset-backed securities based on US sub-prime mortgages, and were frozen in June while their managers and financiers entered negotiations that fell apart the following month.