Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, February 26, 2009

SEC Charges New York Resident with "Funds of Funds" Fraud

The SEC charged Mark Bloom and his firm North Hills Management LLC with securities fraud and obtained an emergency court order to freeze their assets and halt an alleged investment scheme involving the marketing of a "fund of funds" investment vehicle. According to the SEC's complaint, Bloom, through North Hills, raised approximately $30 million from 40 to 50 investors between 2001 and 2007 by representing that the assets would be invested in a diverse group of hedge funds. Instead, Bloom misappropriated more than $13.2 million of investor funds to furnish a lavish lifestyle that included the purchase of luxury homes, cars and boats for himself and his wife, who is named as a relief defendant. The remaining funds were invested in a single fund which itself turned out to be fraudulent.

According to the SEC's complaint, beginning in November 2007, one of the Fund's largest investors, a charitable trust (the "Trust") that funds children's schools began to serve Bloom with redemption requests, which Bloom repeatedly evaded. To date, Bloom has failed to honor the Trust's redemption requests in full and claims that he does not have the means to do so. The Trust is owed more than $9.5 million on its investment.

Judge John G. Koeltl of the U.S. District Court for the Southern District of New York, entered an order temporarily restraining the defendants, freezing their assets, ordering accountings, and approving the appointment of a receiver. The SEC's complaint also seeks a final judgment permanently enjoining the defendants from future violations of the federal securities laws and ordering them to pay financial penalties and disgorge ill-gotten gains with prejudgment interest.

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