* Cioffi, Tannin were charged with fraud, conspiracy

* Verdict could cool prosecutors on Wall Street cases

* Prosecutor says won't stop enforcing honesty in markets

* Tears of relief after verdict is read (Adds Cioffi comment, juror on email evidence)

By Grant McCool and Michael Erman

NEW YORK, Nov 10 (Reuters) - Two former Bear Stearns hedge fund managers were found not guilty of fraud, a decision that could make government prosecutors less likely to bring criminal charges against Wall Street executives for their role in the financial crisis.

The case -- the first major prosecution arising from the meltdown of major U.S. financial institutions -- was seen as a litmus test of whether a jury, presented with evidence from emails between money managers and conference calls with investors, would convict individuals for corporate collapses.

Ralph Cioffi, 53, and Matthew Tannin, 48, were acquitted of all charges on the second day of deliberations by a jury in U.S. District Court in Brooklyn, New York. Cioffi and Tannin left the courthouse with their smiling wives and relatives, some of them crying tears of relief.

Cioffi and Tannin managed two funds, crammed with subprime mortgage-backed securities, that lost institutional and individual investors a total of $1.6 billion when the funds collapsed in mid-2007 at an early phase of the Wall Street market meltdown.