Federal prosecutors in Chicago said on Friday that two former executives at Sentinel Management Group Inc. were indicted for allegedly defrauding customers out of more than $500 million before the futures brokerage went bankrupt in 2007, Reuters reported on Friday. Eric Bloom, who was Sentinel's chief executive, and Charles Mosley, who was a senior vice president and head trader, were accused of pledging customer securities as collateral for a bank credit line that funded a "house" trading portfolio meant to benefit them and Bloom's family. U.S. Attorney Patrick Fitzgerald in Chicago, who announced the charges, called the case one of the largest criminal financial fraud cases ever prosecuted by his office. Sentinel's collapse has been compared with the October 2011 bankruptcy of the larger MF Global Holdings Ltd. No criminal charges have been brought in that case, which Fitzgerald's office is also investigating. According to the indictment in the Sentinel case, Bloom also misled customers in a letter four days before the firm's bankruptcy, blaming its inability to honor client redemptions on a market "liquidity crisis" and "investor fear and panic."
