[Photo:  Eric Bloom & Wife, Chicago Sun Times]

A federal appeals court will not overturn the March 2014 conviction and 14-year prison sentence of former Sentinel Management Group CEO Eric Bloom, whose $666 million fraud led to the demise of his suburban Chicago firm and a big write-down for BNY Mellon. The 7th U.S. Circuit Court of Appeals in Chicago rejected Bloom's contentions that a lack of evidence, prosecutorial misconduct and errors by the trial judge tainted the conviction, and that the sentence was too long because the judge miscalculated the alleged loss.

Prosecutors said Bloom, 51, had misappropriated assets belonging to dozens of clients, including futures commission merchants, commodity pools and hedge funds, to fund a risky "house" trading portfolio, and concealed mounting liquidity problems that culminated in Sentinel's August 2007 bankruptcy.  Sentinel was founded in 1979 by Bloom's father, and it once oversaw $2 billion of assets.

BNY Mellon spent 8 years litigating against Sentinel's bankruptcy trustee to recoup $312 million it had lent Bloom, hoping to be treated as a secured creditor of Sentinel. But it took a $106 million after-tax writedown last January after 7th U.S. Circuit Judge Richard Posner said it deserved to be a lower priority unsecured creditor, having been aware of facts that should have led it to probe Bloom's activity.