Mark Bloom goes from jet setter to pauper

Bloom and his wife Lauren once lived in a triplex on Gracie Square.

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(Fortune Magazine) -- In the annals of fraud, hedge fund manager Mark Bloom will probably be remembered for two details. First, his alleged $20 million scam tipped off regulators to the larger, purported $554 million one at the brokerage firm WG Trading. Second, the former big spender is now so cash-strapped that he's planning on using a public defender when his case gets underway this summer.

Bloom's problems began in December 2008, when the Alexander Dawson Foundation sued Bloom and his firm, North Hills Management. In the complaint the Nevada-based charity claimed it had entrusted $13.5 million to Bloom, who used the money to purchase several big-ticket items, including a $5.2 million Manhattan triplex. The foundation grew wary of Bloom when it requested redemptions starting in 2007 and received only a fraction of its money back.

Bloom's scheme, according to court documents, was not particularly complex: He told investors he operated a "fund of funds" to achieve a 12% annual return. Once Bloom had investors' money, he diverted it from the North Hills account for personal use.

The National Futures Association became aware of the Dawson Foundation's lawsuit and decided to investigate Bloom, who had retained his membership in the NFA. "We didn't get responses from Bloom, so we started looking for other NFA members previously associated with him," says president Dan Roth of the regulator's decision to audit anyone who had worked with Bloom. The NFA investigation led to WG Trading, where Bloom had worked from 1992 to 2001.

When WG Trading's co-founders, Paul Greenwood and Stephen Walsh, refused to cooperate, the NFA contacted the Commodities Futures Trading Commission. Eventually the FBI and U.S. Attorney's Office got involved. Several weeks later, in late February 2009, the U.S. Attorney's Office in Manhattan charged Greenwood and Walsh in one case and Bloom in a separate one. Walsh's and Bloom's attorneys declined to comment. Calls to Greenwood's attorney and Bloom were not returned.

The criminal complaint against Bloom suggests that he was able to indulge his family in a luxurious lifestyle. According to the foundation lawsuit, the Blooms owned properties in Florida and the Hamptons. They kept a fleet of cars that included Land Rovers, Mercedeses, and BMWs. What's more, the couple consumed conspicuously even as Bloom's alleged Ponzi scheme was coming to light. Sources say the Blooms spent around $300,000 on their daughter's bat mitzvah in October 2008. The good times stopped rolling in mid-April when the Blooms consented to a restraining order that prevents them from liquidating, among other things, their beach house, a 2005 Formula 330 Sun Sport boat, two Steinway pianos, and three fur coats in storage at J. Mendel.

With his assets tied up, Bloom couldn't afford to keep his high-profile attorney, Judd Burstein, whose former clients include talk show host Sally Jessy Raphael and Don King. So Bloom became the client of federal public defender Mark Gombiner. The case may not make it to trial because, as Don Campbell, a former federal prosecutor and the Dawson Foundation's local counsel, puts it, "Bloom's admitted to so many people what he's done. It's virtually futile to try to put on a defense."