Texas Businessman Ordered to pay $71 Million to Ponzi Scheme Victims
The U.S. District Court for the Eastern District of Texas ordered businessman George Hudgins to pay $71 million to victims of his Ponzi scheme investment fraud.
The business man was ordered to pay $15 million in civil penalties and was bared from the commodity industry. From June 2001 to May 2008, Hudgins solicited people to invest about $88 million in a commodity pool that was purported to engage in commodity futures training. Investors were lured through group presentations, newsletters, and personal meetings from December 2003.
From the time the commodity pool was set up until April 30, 2008, the pool netted total losses of more than $8 million. The pool made a net loss each year, but Hudgins told investors the company, between 2000 and 2007, made net annual profits from 22.5 to 95 percent.
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To placate investors, Hudgins sent them false account statements, reflecting profits. He reportedly paid older investors approximately $17 million from money solicited from newer investors in his scheme. According to court records, the remainder of the money was used for lavish personal expenses, including an antique sports car collection, jewelry, and an airplane.
In May 2008, a judge, on the request of the Commodity Futures Training Commission, froze all Hudgins’ assets and anxious investors began to consult securities attorneys. A court-appointed receiver was able to recover approximately $24 million through the sale of assets and return of false profits that some investors had received. In March, the funds were distributed to some of the investors.
In September 2008, Hudgins pled guilty to wire fraud, money laundering, and was sentenced to 120 months in federal prison. Hudgins’ Ponzi scheme was one of the first in a series that has rocked the financial world. Since then, Ponzi schemes have continued to turn up at an alarming rate. In 2009 alone, the Securities and Exchange Commission (SEC) has brought enforcement action in at least 24 such schemes.
