The involvement of the Bermuda offices of Deloitte & Touche and Ernst & Young features prominently in every story on the collapse of the Manhattan Investment Fund.

And the latest reports on Michael Berger, the 28-year old Austrian man who was the brains behind the project, were no exception.

Berger denied two counts of fraud in New York's Manhattan Federal Court on Thursday. Charged with defrauding investors of over $400 million, if convicted he faces ten years in prison and a $1.25 million fine.

He was released on $100,000 bail after Thursday's court proceedings.

Berger is accused of falsifying accounts which were signed off by auditors Deloitte & Touche in the Bermuda office, and confirmed by Fund Administration Services (Bermuda) owned by Ernst & Young.

Ten individuals and companies have filed writs against the fund in the Bermuda Supreme Court and to date those claims total $4.762 million.

Fund Administration Services Bermuda Inc. and the Bank of Bermuda are among those named in the Bermuda filed writs.

Berger had operated Manhattan Investment Fund from offices on New York's ritzy Park Avenue. But the fund was registered in the British Virgin Islands and administered and audited by Bermuda companies.

The hedge fund specialised in shorting Internet and high tech share prices on Wall Street. It collapsed when accountants discovered that massive losses suffered by the company had not been recorded and that assets of only $35 million existed where the figure should have been $525 million.

But at least one investor, Olivest Limited (Bermuda), said they based their decision to invest on the good reputation of the Bermuda companies administering the Fund.

In a letter to HedgeFund.net, Olivest Ltd. wrote: "If the supporting firms are not punished for their malfeasance, then their services are not worth a dime.

"We were very impressed to see that world renowned companies were the supporting/controlling firms namely Fund Administration Services (Bermuda) Ltd. an affiliate of Ernst & Young) as administrator, Deloitte & Touche as auditor and Bear Stearns as broker/clearing house and custodian.'' The letter added: "The entire hedge fund industry including the professional hedge fund managers, should take a very strong and active interest in the Manhattan case, not only to ensure that proper clarification and solutions are being found in this case, but to make sure that such an event cannot occur again and that there must be clear duties, obligations and responsibilities on the part of the supporting firms.

"Otherwise, nobody can, nor should they have, any trust in the hedge fund industry.''