Government regulators Tuesday shut down the business of a 23-year-old New York investment adviser alleged to have bilked clients out of about $8 million to buy an art collection, luxury homes and other trappings of the Wall Street rich.
In a New York federal court, the Securities and Exchange Commission charged David P. Bloom and his Greater Sutton Investors Group Inc. with illegally operating as an investment adviser and with fraud by giving clients false reports on their accounts.
The judge ordered that millions of dollars worth of cars, houses and paintings owned by Bloom be handed over to a receiver after the SEC presented evidence that Bloom had personally spent about 80% of the $10 million he raised from clients since January, 1986.
According to court papers, Bloom's short investment career began in earnest as a college student in 1983 when he helped run an "investment club" with capital provided by students, family friends and others.
Even then, the government said, Bloom was skimming the club's funds to meet personal expenses.
Starting with a small number of clients after graduation in December, 1985, Bloom expanded his business base to about 100 clients and created himself a reputation of being a highly successful money manager and investment adviser.
Beginning in early 1986, Bloom cemented that reputation in the minds of many clients with phony account statements and portfolio and trading histories, which led some clients to give him even more investment capital.
If clients requested their capital be returned, the funds were merely siphoned from other investors' accounts, the SEC charged.
A government official in Washington who requested anonymity said the SEC received a tip about Bloom's activities.
Without admitting or denying the allegations, Bloom and Greater Sutton Investors Group agreed to settle the SEC civil charges by pledging to abide by federal securities laws in the future. Bloom and Sutton also agreed to a permanent bar from the securities industry.
In addition to the court-appointed receiver empowered to recommend procedures to distribute Bloom's assets, a government official said Tuesday that criminal charges against Bloom were likely.