Thursday, 27 October 2016
Last updated 6 hours ago
Apr 3 2009 | 12:30pm ET
The U.S. Commodity Futures Trading Commission has obtained a court order against George Hudgins ordering him to pay $71 million to victims of his Ponzi scheme and a civil penalty of $15 million.
The order also permanently bars Hudgins from the commodity industry.
According to the order, from June 2001 through May 2008, Hudgins induced investors to pony up approximately $88 million for a commodity pool that traded on-exchange commodity futures and options contracts. Hudgins allegedly solicited investors through false representations in promotional packets, newsletters, group presentations and face-to-face meetings.
Hudgins allegedly told investors that. from 2000 to 2007 the commodity pool produced net annual profits between 22.5% to 99%, when the pool actually had a net loss each year since its inception in December 2003, and total losses of over $28 million as of last April.
To lull investors into a false sense of security that their funds were not at risk, Hudgins sent investors false account statements, showing that their accounts were profiting from his trading activity. In fact, the accounts suffered millions in losses over their lifetime and Hudgins paid out approximately $17 million in false “profits” to certain investors from money Hudgins obtained from other victims of his fraud.
Further, after suffering millions of dollars in trading losses, court records show that Hudgins used the remainder of the money to support his lavish lifestyle, which included purchasing several antique classic sports cars, Tiffany jewelry, a 300-acre ranch along the Angelina River, and an airplane. Hudgins also commissioned and almost completed the construction of an airplane hangar.
On May 13, at the CFTC’s request, U.S. District Court for the Eastern District of Texas froze Hudgins’ assets and appointed a receiver to recover and distribute Hudgins’ assets to defrauded investors. Of the $71 million solicited by Hudgins, the receiver has collected over $24 million through the asset freeze, the sale of assets, the return of false profits already sent by Hudgins to certain investors, and the return of gifts made by Hudgins to family and friends.
In a separate criminal action, Hudgins pleaded guilty in September to wire fraud, embezzlement, and money laundering. He was sentenced last month to 121 months in federal prison.