Sentinel Management Group

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Sentinel Management Group, Inc.
Sentinel.png
Founded 1979 (bankruptcy in 2007)
Headquarters Northbrook, IL
Key People Eric Bloom, President & CEO
Products Cash management firm

Sentinel Management Group, Inc. is a former Illinois-based cash management firm that collapsed following its filing Ch. 11 bankruptcy and the filing of U.S. fraud charges against the company. Sentinel froze customer accounts in August 2007 as the Securities and Exchange Commission (SEC) and the National Futures Association (NFA) began investigating the company's recordkeeping.[1]

History

Sentinel was founded by Philip Bloom in 1979 in order to manage cash for brokers at the Chicago Board of Trade and Chicago Mercantile Exchange, with the promise that the firm would invest only in top quality investments that could be returned almost "at a moment's notice." [2] In 1988 he hired his son Eric and, in 1992, named Eric as company president.[3]

On August 14, 2007, Sentinel halted customers' ability to withdraw funds after reportedly requesting such an order from the U.S. Commodity Futures Trading Commission (CFTC). While some regulators claimed that no such request was ever made, the company made the decision to avoid a significant loss. At the time, Sentinel was managing approximately $1.6 billion in assets.[4]

Brokers Farr Financial and Velocity Futures sued as a result of the freeze and due to Sentinel's attempting to sell assets to hedge fund company Citadel Investment Group LLC. Three days later, on August 17, 2007, Sentinel filed for Ch. 11 bankruptcy.[5]

On August 20, 2007, the SEC filed civil fraud charges against Sentinel. According to a report by Reuters: "In a complaint filed in U.S. District Court in Chicago, the SEC accused Sentinel of defrauding clients by improperly commingling, misappropriating and leveraging their securities without their knowledge in violation of the Investment Advisers Act." Nearly $460 million in customer securities had been transferred to a proprietary house account by Sentinel.[6]

In June 2012, Sentinel CEO Eric Bloom and head trader Charles Mosley were indicted on 20 counts of fraud in connection with the Sentinel bankruptcy.[7] In October 2013, Mosley pleaded guilty on two counts of investment adviser fraud in exchange for an agreement to cooperate with prosecutors in their case against Bloom.[8]

In March 2014, Eric Bloom was found guilty on 18 counts of wire fraud and one count of investment adviser fraud. [9]

Products and Services

Sentinel invested in managed-futures funds, allowing clients, mostly high-net-worth individuals and hedge funds, to withdraw from accounts quickly and easily. Short-term commercial paper, foreign currency, investment-grade bonds and Treasury notes were among Sentinel's investments prior to the company's collapse.

Key People

References

  1. Why Sentinel Collapsed. Wall Street Journal/Barron's.
  2. Search is on for Sentinel assets. Chicago Tribune.
  3. Sentinel founder steps in again to aid son in troubled time. Chicago Tribune.
  4. Sentinel Management Group Halts Client Redemptions. Bloomberg.
  5. Sentinel Management Files for Chapter 11 Bankruptcy. Bloomberg.
  6. U.S. files fraud charges against Sentinel. Reuters.
  7. Sentinel indictments: Feds say 2 reaped $500 million in fraud. Chicago Tribune.
  8. Ex-Sentinel Management Trader Pleads Guilty in Fraud. Bloomberg.
  9. Ex-Sentinel CEO found guilty over $500 million fraud. Reuters.