By Jeremy Pelofsky

WASHINGTON, Nov 12 (Reuters) - A top U.S. Justice Department official said on Thursday the acquittal of two former Bear Stearns hedge fund managers on fraud charges was not a setback to pursuing such cases and that prosecutors would continue to do so.

"When the laws and the facts dictate that we should bring charges we will, and we will ultimately always abide by the judgment and verdict of the jury," said Lanny Breuer, assistant attorney general for the Justice Department's criminal division, which broadly oversees such prosecutions.

"I don't think it's a setback. We have to be vigilant and move forward and we'll do just that," Breuer told reporters after speaking to a group about complying with federal corruption laws.

A New York jury on Tuesday acquitted Ralph Cioffi and Matthew Tannin on all charges of conspiracy, securities fraud and wire fraud. Cioffi was also acquitted on a charge of insider trading.

They had managed two hedge funds that were chock full of subprime mortgage-backed securities and lost institutional and individual investors $1.6 billion when they collapsed in mid-2007 at the early stages of the Wall Street market meltdown.

Their trial was seen as a test case for prosecuting people for their alleged roles in the financial crisis and some have questioned whether the acquittals would give the department pause in pursuing such cases.

Bear Stearns collapsed in March 2008, several months after the funds managed by the two men failed. It was sold to JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) in a government-brokered fire sale.

One former federal prosecutor said that the case against the two fund managers was particularly hard to make because the markets are constantly moving and evolving which can lead traders to change their strategies minute by minute.