US Justice Department Convicts Hedge Fund CEO Of $500 Million Fraud

DoJNew York (HedgeCo.Net) – The CEO of the now-bankrupt hedge fund Sentinel Management Group, Inc., was convicted today of defrauding more than 70 customers of over $500 million before the firm collapsed in August 2007.

“The defendant, Eric Bloom, misappropriated securities belonging to customers by using them as collateral for a loan that Sentinel obtained from Bank of New York Mellon Corp., which was used, in part, to purchase millions of dollars’ worth of high-risk, illiquid securities not for customers, but for a trading portfolio maintained for the benefit of Sentinel’s officers, including Bloom, members of his family, and corporations controlled by the Bloom family.” The US Justice Department said.

A federal jury deliberated less than two hours after a four-week trial in U.S. District Court before returning guilty verdicts on 18 counts of wire fraud and one count of investment adviser fraud. The case is one of the largest financial fraud cases ever prosecuted in Federal Court in Chicago.

Sentinel’s head trader, Charles K. Mosley, pleaded guilty last October to two counts of investment adviser fraud and is awaiting sentencing.

“Sentinel was sinking like the Titanic,” Assistant U.S. Attorney Clifford Histed told the jury in closing arguments. “Sentinel was not a victim of the credit crisis,” he said, adding that the “financial crisis merely exposed the fraud” that had been going on for years.

The Justice Department reports that in 2007, Bloom knew that Sentinel was approaching insolvency and that defaulting on the Bank of New York loan was a real possibility, yet he caused Sentinel to take in more than $100 million in customers’ money and continued to conceal Sentinel’s true financial condition from customers.

Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership in HedgeCo.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!

This entry was posted in HedgeCo News. Bookmark the permalink.

Leave a Reply