Nacogdoches, TX – George D. Hudgins is facing repercussions following a Commodity Futures Trading Commission (CFTC) investigation into a fraudulent investment scheme, according to a release issued October 4, 2010. The CFTC originally filed suit against Hudgins in May 2008, alleging he fraudulently solicited millions of dollars from the public for a commodity pool trading futures contracts.
The CFTC order, finalized September 30, 2010, details that Hudgins solicited investments without properly disclosing risks or his financial background. Investigators found that Hudgins incurred losses totaling $30 million between 2005 and 2008 – a sum exceeding 300 percent of his initially stated net worth. Despite these significant losses and inconsistencies in his account opening statements, the firm Rosenthal Collins Group, L.L.C. (RCG) failed to adequately supervise their employees and enforce internal compliance procedures designed to identify such suspicious activity.
While the primary charges are against Hudgins for the initial fraud, RCG is also being penalized for its lack of oversight. The CFTC has ordered RCG to pay a $780,000 civil monetary penalty and disgorge $618,526 in commissions earned from Hudgins’ trading. The funds from the disgorgement will be distributed to those defrauded by Hudgins through the court-appointed receiver in the CFTC litigation.
The CFTC’s investigation revealed that RCG employees did not diligently enforce “know your customer” policies, failing to gather sufficient information about Hudgins’ identity, background, investment objectives, and financial resources. They also failed to investigate and report the red flags associated with his accounts. The case highlights the importance of robust compliance procedures for financial institutions to prevent and detect fraudulent activity.
The CFTC’s Division of Enforcement, led by James Deacon, Kim Bruno, and others, conducted the investigation.
Source: CFTC.gov
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