Thursday, 31 July 2014
Last updated 6 hours ago
May 22 2008 | 1:59am ET
The U.S. Commodity Futures Trading Commission has frozen the assets of George Hudgins, purveyor of commodity pool 3737 Financial. The federal court order also prohibits the destruction of documents.
The CFTC alleges that Hudgins solicited investors to invest in 3737 Financial, which traded exchange-traded commodity futures and option contracts in violation of the anti-fraud provisions of the Commodity Exchange Act.
Hudgins allegedly lied to induce investors and prospective investors to invest or remain invested in the pool, including false representations about how long the commodity pool was in existence, the size of the pool’s assets and the historical profitability of the pool. For example, a January 2005 promotional packet represented that the commodity pool had gross annual returns of 46% to 99% percent from 2000 through 2004.
In fact, the pool did not exist until November 2004 and, therefore, had no returns from 2000 through October 2004. Similarly, in a January 2007 presentation to investors and potential investors, Hudgins represented that the pool had annual profits of 53.33% in 2005 and 22.5% in 2006, when, as alleged, the pool accounts suffered losses of $9.4 million in 2005 and $11.1 million in 2006.
During that same presentation, Hudgins declared that, as of that time, the pool had an investment portfolio of approximately $80 million, when, in fact, the net value of the accounts associated with the pool was negative $100,199. The accounts associated with the pool suffered losses of more than $25 million from 2005 through 2007.
The CFTC complaint also alleges that Hudgins is liable for failure to register with the CFTC as a commodity pool operator.
The CFTC is seeking preliminary and permanent injunctive relief, the return of funds to defrauded participants, the repayment of ill-gotten gains, and civil monetary penalties for each violation of the CEA.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…