Charlotte, NC – Sidney S. Hanson and Charlotte M. Hanson have been ordered to pay $24 million in restitution and penalties for operating a foreign currency (forex) Ponzi scheme, the U.S. Commodity Futures Trading Commission (CFTC) announced November 1, 2011. The supplemental consent order, entered by Judge Robert J. Conrad, Jr. of the U.S. District Court for the Western District of North Carolina on October 28, 2011, finalized the amounts owed following an initial complaint filed in 2009.
The Hansons, along with their companies Queen Shoals, LLC, Queen Shoals II, LLC, and Select Fund, LLC, are accused of defrauding customers out of at least $22 million, starting in June 2008. The scheme involved soliciting funds for off-exchange forex trading, but instead of investing the money, the Hansons allegedly misappropriated it for personal use and to pay earlier investors – a hallmark of a Ponzi scheme.
According to the CFTC’s complaint, the Hansons falsely claimed success in forex trading, promising guaranteed profits through “non-depletion accounts” with no risk to principal. They enticed investors with returns of 8 to 24 percent. They falsely represented that they profitably traded forex on behalf of customers and guaranteed both the principal and the promised interest via “non-depletion” accounts backed by gold and silver bullion.
However, the CFTC alleges that little to none of the customer funds were actually deposited into forex trading accounts. Instead, the money was used to fund the Hansons’ lavish lifestyle, including the purchase of an 88-acre farm, private plane rentals, and luxury vacations. Additional funds were used to make payments to existing investors, creating the illusion of profitability.
Six relief defendants – Secure Wealth Fund, LLC; Heritage Growth Fund, LLC; Dominion Growth Fund, LLC; Two Oaks Fund, LLC; Dynasty Growth Fund, LLC; and Queen Shoals Group, LLC – were also ordered to disgorge ill-gotten gains totaling $23.3 million, as they received funds resulting from the fraudulent conduct. Sidney Hanson is currently incarcerated, awaiting sentencing in a related federal case as of March 31, 2011.
The defendants and relief defendants had previously consented to permanent injunctions against further violations of federal commodities laws and trading. This supplemental order establishes the specific financial penalties and restitution amounts to be paid.
Source: CFTC.gov
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