Liquidators of two Bear Stearns mortgage hedge funds, which collapsed last year, filed a suit on Monday against the bank and its auditor, Deloitte & Touche, in an attempt to recover more than $1bn (£0.5bn) in losses.

The suit, filed in US District Court in Manhattan by Geoffrey Varga and William Cleghorn, claims Bear, the managers of the hedge fund, and Deloitte failed to living up to assurances that the funds were relatively safe and conservative investment vehicles, Reuters reports.

The liquidators claim Bear Stearns and its hedge fund managers ‘conceived, marketed and managed hedge funds that they knew would be viable so long as - but only so long as - the US housing market continued to rise’.

The suit – which also seeks punitive damages – accuses the company, the fund managers, and Deloitte of violating their fiduciary and professional duties, claiming Deloitte's preparation of the funds' audits was ‘at a minimum negligent.’