Even among the legions of successful young investors operating on Wall Street in the headiest days of the bull market, David Bloom, 23, stood out as a precocious hotshot. Armed with little more than a good line and glib self- assurance, the son of a Manhattan pizza-restaurant owner persuaded scores of clients to give him some $10 million so that he could play the stock market on their behalf. For some time, Bloom's clients were satisfied: quarterly reports for their accounts showed savvy trades and fat profits.
What no one realized was that, according to the Securities and Exchange Commission, the financial statements, the fat profits and the entire enterprise were part of an elaborate fiction. Instead of buying stocks for his customers, the SEC charged last week, Bloom used the $10 million to support a lavish life-style. He bought about $5 million worth of paintings, an $830,000 Manhattan condominium and a $2 million vacation house in posh East Hampton, Long Island. Bloom, who also owned a Mercedes-Benz and an Aston Martin convertible, went skiing in St. Moritz, paid up to $500 for a bottle of wine and bought a $195,000 diamond-and-platinum necklace that he said he intended to give to "the woman I marry." Says a former girlfriend: "David Bloom was obsessed with possessions."
Now those possessions are gone. Without admitting guilt, Bloom agreed to an SEC settlement in which he surrendered $8 million worth of paintings, real estate and other assets. Proceeds from their sale will be split among the investors who gave him money. Two days after the settlement, federal prosecutors in Manhattan charged him with mail fraud. If convicted, he could face up to five years in prison.
Bloom's lawyer, Peter Morrison, did not deny the charges, but offered a novel defense. Had Bloom actually put his customers' money into stocks, suggested Morrison, they might be getting less of it back because of the Oct. 19 market crash. So putting investors' money into art and real estate may have been a wise strategy.
Bloom was in fact a shrewd art investor. He bought paintings by Edward Hopper, John Singer Sargent, Mary Cassatt and Willem de Kooning. Among the most expensive: Thomas Wilmer Dewing's Lady in White (worth $750,000) and John White Alexander's Alethea ($660,000). Says Loraine Pack-Liebmann, a Manhattan art dealer: "The kid did well. Many of the works he has bought have appreciated substantially in value." Example: Severin Roesen's Vase of Flowers in Footed Glass Bowl with Bird's Nest, purchased for $175,000, may now be worth $250,000, a potential profit of 43%.