Washington, D.C., Feb. 25, 2009 (LAWFUEL) – The Securities and Exchange Commission today 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, filed in federal court in Manhattan, the SEC alleges that 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.
Scott Friestad, Deputy Director of the SEC’s Division of Enforcement, said, “We allege a blatant investment scheme, and today’s action shows that the Commission will act decisively to preserve assets for investors.”
James Clarkson, Acting Director of the SEC’s New York Regional Office, added, “As today’s emergency action demonstrates, the SEC will bring aggressive enforcement action against individuals who defraud innocent investors.”
The SEC alleges that the defendants solicited investments in North Hills, L.P. (the “Fund”), which is named as a relief defendant, by making misleading representations. Bloom and North Hills represented that the Fund’s assets would be allocated across multiple funds and fund managers to ensure diversification and moderate risk. They sent investors false monthly account statements that portrayed their investments as profitable when, in reality, Bloom was systematically looting the Fund’s trading account by making “loans” to himself and by investing in contravention of the Fund’s stated investment strategy in an investment known as the Philadelphia Alternative Asset Fund (PAAF). Bloom received undisclosed commissions from PAAF in excess of $355,000 over a 16-month period. PAAF itself was uncovered as a fraudulent scheme in June 2005.
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.
The SEC complaint charges violations of the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.
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.
The U.S. Attorney’s Office (USAO) for the Southern District of New York announced parallel criminal charges against Bloom earlier today, and the U.S. Commodity Futures Trading Commission (CFTC) filed related charges against Bloom and North Hills.
The SEC’s investigation is ongoing. The Commission acknowledges the assistance and cooperation of the USAO, the Federal Bureau of Investigation, the CFTC and the National Futures Association.List your legal jobs on the LawFuel Network