Tyler, Texas – George D. Hudgins, a Texas resident, has been ordered to pay $71 million in restitution to victims of his Ponzi scheme and a $15 million civil penalty, the U.S. Commodity Futures Trading Commission (CFTC) announced on April 2, 2009. The order, issued by the Honorable Leonard Davis of the U.S. District Court for the Eastern District of Texas, also permanently bans Hudgins from the commodity industry.
The CFTC initially filed a civil lawsuit against Hudgins on March 13, 2008, alleging a fraudulent scheme that spanned from June 2001 to May 2008. According to the court order, Hudgins fraudulently induced approximately $88 million in investments from the public into a commodity pool trading futures and options contracts.
Hudgins allegedly made false representations to investors through promotional materials, presentations, and meetings, exaggerating the pool’s profitability and history. He falsely claimed annual profits between 22.5 percent and 99 percent from 2000 to 2007, while the pool actually incurred net losses each year since its inception in December 2003, totaling over $28 million in losses by April 30, 2008.
To maintain the illusion of success, Hudgins distributed fabricated account statements showing fictitious profits. He reportedly used funds from new investors to pay out approximately $17 million in false “profits” to earlier investors, characteristic of a Ponzi scheme. The remaining funds were allegedly diverted to finance a lavish lifestyle, including antique sports cars, jewelry, a 300-acre ranch, and an airplane, as well as the construction of an airplane hangar.
A receiver appointed by Judge Davis froze Hudgins’ assets and has already recovered over $24 million through asset sales and the return of fraudulent profits. This amount was distributed to defrauded investors on a pro rata basis on March 12, 2009.
In a separate criminal case, Hudgins pleaded guilty to wire fraud, embezzlement, and money laundering on September 9, 2008. He was sentenced to 121 months in federal prison on March 13, 2009, by U.S. District Court Judge Thad Heartfield. The CFTC collaborated with the United States Attorney’s Office, the Federal Bureau of Investigation, and the Texas Rangers on this case.
Source: CFTC.gov
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