Release Number 5622-09
For Release: February 25, 2009
CFTC Charges Fund Manager Mark Bloom and His Firm, North Hills Management LLC, with Misappropriating Over $13 Million
Charges Against Bloom Include Receiving Undisclosed Kickbacks And Defrauding Fund Participants Out Of Millions In Connection With Distributions From 2005 CFTC Fraud Action Against Another Fund Operator
Washington, DC— The Commodity Futures Trading Commission (CFTC) announced today that it filed an action in the United States District Court in the Southern District of New York against New York City fund manager Mark Evan Bloom and his firm, North Hills Management LLC (NHM). The complaint charges Bloom and NHM with: misappropriating over $13 million of the assets of North Hills LP. (North Hills Fund or the Fund), a fund managed by defendants and investing North Hills Fund assets contrary to the represented investment strategy. Bloom and NHM are also charged with defrauding North Hills Fund participants in connection with distributions made in the name of the Fund in a 2005 CFTC anti-fraud action brought against another fund operator, the Philadelphia Alternative Asset Management Company (PAAM) and Paul Eustace. (See CFTC News Releases 5091-05, June 29, 2005 and 5531-08, August 19, 2008.) Mark Bloom’s wife, Lauren Bloom, was named as a relief defendant.
According to the CFTC’s complaint, Bloom originally formed the North Hills Fund and created NHM, with the purported design of an enhanced stock index fund, trading, among other things, commodity futures contracts and options. In 2001, Bloom converted the Fund into a “fund of funds” (an investment strategy of holding a portfolio of other investment funds). As alleged, defendants provided existing and prospective Fund participants with documents outlining, among other things, that the objective of the fund was to invest and trade in all forms of financial investments, including commodities and commodity contracts, and that its policy was “seeking satisfactory returns while minimizing risk.”
The CFTC’s complaint alleges that Bloom, instead of following the purported strategy of the Fund, misappropriated at least $13 million from the North Hills Fund for the personal use of Bloom and his wife. Defendants took the money by executing purported promissory notes in the name of Bloom and his wife in which they provided a personal guarantee, stating in writing that the funds were for the benefit of Bloom and his wife. The notes were payable on demand by NHM to NHM.
As alleged, Bloom used the North Hills Fund’s assets to support a lavish life style. For example, Bloom executed a promissory note of approximately $5 million in 2003 and in March 2003, Bloom and his wife purchased a luxury apartment in Upper Manhattan for $5.2 million. Bloom later transferred his ownership to his wife who sold the apartment in 2007 for $11.2 million. Similarly, in 2003, Bloom transferred North Hills Fund assets in to the NHM bank account whenever the account balance was negative and out of that account paid himself $1.5 million in office compensation, $1.2 million to an interior design firm, and $1.8 million in personal expenses.
Bloom Invested North Hills Fund Assets In The High Risk PAAM; Fund Shut Down Because Of Massive Fraud And Received Referral Fees For Doing So
The CFTC’s complaint also alleges that after taking over $13 million for his personal use, in 2004 and 2005, Bloom invested approximately $17 million of North Hills Fund assets in a high risk commodity futures and options fund (PAAF) operated by PAAM. This investment represented at least half of the assets of North Hills Fund and was contrary to the moderate risk asset allocation strategy Bloom represented was the strategy for the North Hills Fund. North Hills Fund participants only learned of the concentrated PAAF investment after the CFTC sued and shut down PAAM and Eustace in late June 2005.
Bloom also failed to inform North Hills Fund participants that he had received referral fees totaling $1.6 million for referring prospective investors to PAAM, including North Hills Fund.
Distributions From The CFTC Action Against PAAM Never Reached North Hills Fund Participants And Remain Unaccounted For By Bloom
Allegedly, Bloom also never informed North Hills Fund participants that a receiver appointed in the CFTC action had distributed approximately $9 million in distributions in the name of North Hills Fund or that Bloom had compromised the North Hills’ interest in the PAAF distributions through a third party agreement. Bloom also never disclosed that he had received approximately $8 million in the name of the North Hills Fund pursuant to the third party agreement. Bloom has not accounted for those funds.
The CFTC complaint further alleges that Bloom concealed his frauds from North Hills Fund participants by sending out monthly account statements showing profitable results and providing written updates on the progress of the CFTC’s action against PAAM and receiver’s efforts to recover assets. Based on Bloom’s rosy statements and updates, North Hills Fund participants expected to receive distributions from the receivership estate.
“This action demonstrates the length to which unscrupulous individuals will go to defraud investors. Here, proceeds that were recovered from another fraud were recovered for the benefit of North Hills investors and appear to have been misappropriated a second time by Bloom,” said Stephen J. Obie, Acting Director of Enforcement.
In its continuing litigation, the CFTC seeks an order of permanent injunction against the defendants, restitution, disgorgement of ill-gotten gains, monetary penalties and trading and registration bans.
The Securities and Exchange Commission (SEC) filed a related action in the same court, charging securities fraud against Bloom and NHM and naming as relief defendants the North Hills Fund and Lauren Bloom. This same day the U.S. Attorney’s Office for the Southern District filed a criminal complaint against Bloom, and Bloom was arrested today.
The Division appreciates the cooperation of the National Futures Association, SEC and U.S. Attorney’s Office in this matter.
The following CFTC Division of Enforcement staff are responsible for this action: Vincent A. McGonagle, Gretchen L. Lowe, Glenn Chernigoff, Kara Mucha, Michael Berlowitz, David Acevedo, Timothy Kirby, Luke Marsh, and Adetoyese Olarinde.
R. David Gary
Last Updated: February 25, 2009