UPDATE 1-Sparring over evidence at Wall Streeters trial

* Jury hears closing summations

* Case expected to go to jury on Monday

* Prosecutors say fund managers lied

* Defense challenges government case (Recasts to add summation by Cioffi's lawyer)

By Grant McCool

NEW YORK, Nov 5 (Reuters) - In closing arguments in the trial of the first high-profile Wall Streeters tried for fraud stemming from the financial crisis, a U.S. prosecutor said two hedge fund managers told "black and white lies," but a defense lawyer attacked the government for "misleading" the jury.

U.S. prosecutor Ilene Jaroslaw said on Thursday former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin lied to investors in 2007 about the health of their funds even though they were seeing some of the worst market conditions ever.

"This case is not about hedge fund strategy or what happened in the market in 2007," Jaroslaw told a Brooklyn, New York, federal court jury.

"What it is about, is the two defendants lied to their investors. It's not about the future ... but a case of black and white lies," she told the jury, which is expected to begin deliberations on Monday, nearly a month after the trial began on Oct. 13.

Cioffi, 53 and Tannin, 48, have denied charges of securities fraud, wire fraud and conspiracy in a June 2008 indictment that made them the first high-profile Wall Streeters to be criminally charged in a case stemming from subprime mortgage-backed securities that fueled the market meltdown.

When Cioffi's main lawyer, Dane Butswinkas, took his turn summarizing the evidence to the jury, he said prosecutors had given jurors a "misimpression" and "misleading sound bites" from emails and had implied conspiracy where there was none.

"If you look at some of the tactics I just showed you, do they make you pause?" Butswinkas asked the jury. "If they would, then that's reasonable doubt."

The 12 jurors were selected after answering written and oral questions about whether they could be fair and impartial in an era of lost jobs, government bailouts of banks, controversial executive bonuses and Wall Street in crisis.

Butswinkas also urged the jury to question whether the New York City borough of Brooklyn was the correct place for the government to bring the case because the alleged offenses took place in the borough of Manhattan.

"If you find that none of the conspiracy happened outside of Manhattan ... you stop there," he said.

PRISON TERMS POSSIBLE

The two men could be imprisoned for up to 20 years if convicted by the jury. One of Tannin's lawyers is expected to offer a summation on Friday.

Prosecutors contend that at least by March 2007 -- more than 18 months before the full extent of the financial crisis became clear -- Cioffi and Tannin promoted to investors two funds crammed with subprime mortgage-backed securities, while privately expressing, in their emails, fears of a market calamity. Investors lost up to $1.6 billion, according to prosecutors.

Funds managed by Cioffi and Tannin were laden with subprime mortgage-backed securities and collapsed in June 2007 after years of consistent success.

Less than a year later, Bear Stearns Cos was out of business. Neither man was charged with contributing to the collapse of Bear in March 2008. It was sold to JPMorgan Chase & Co (JPM.N) in a government-brokered deal.

Cioffi and Tannin, dressed in dark business suits, sat with their lawyers at a long table in court, listening intently to the closing arguments.

Much of the government's evidence centers on emails written by the two men to each other, colleagues at Bear Stearns Asset Management and investors outside the firm.

The government evidence also focused on at least one conference call with investors about expected redemptions. Prosecutors alleged the managers misled investors about the amount, but defense lawyers have challenged that.

In addition to fraud charges, Cioffi is accused of insider trading for moving $2 million from one fund he managed to another fund he managed. Cioffi, who worked for Bear Stearns for 25 years, has denied the charge.

Prosecutor Jaroslaw, in addressing the insider trading charge, told the jury that Cioffi "saw the dire straits the funds were in" and "took out what he thought he could get away with."

Butswinkas said Cioffi's optimism about the future of the funds was "sincere" and the hedge funds had been projected to provide $30 million of his future profits.

The case is USA v Cioffi & Tannin, U.S. District Court for the Eastern District of New York, No. 08-415. (Editing by Tim Dobbyn and Steve Orlofsky)