A Texas man, who was sentenced in March to a ten-year prison sentence for commodity fraud, has settled a civil suit filed against him by defrauded investors. George Hudgins, the owner of 3737 Financial L.P., was accused by investors and the federal government of orchestrating a fraudulent trading scheme involving commodity futures and options that bilked investors of nearly $71 million. Specifically, Hudgins was accused of violating the anti-fraud provisions of the Commodity Exchange Act. According to both the civil and criminal accusations against him, Hudgins lost the nearly $71 million dollars of investor funds trading silver, sugar and S&P 500 index futures through his firm.
Hudgins’ problems began when he began soliciting investors with promotional packets, newsletters, group presentations, and face-to-face meetings. During these solicitations, Hudgins made false representations about how long his firm, 3737 Financial L.P., was in existence, the size of the firm’s assets and the firm’s history of profitability. For example, in a promotional packet used in January 2005, Hudgins claimed that 3737 Financial had gross annual returns of 22% to 99% from 2000 through 2007. However, according to the Commodity Futures Trading Commission, 3737 Financial did not exist before December 2003.
Instead of being a profitable enterprise, 3737 Financial actually had trading losses that exceeded $28 million, according to the lawsuit. It was alleged that Hudgins kept his fraudulent scheme going by paying $17 million in false “profits” to some investors using money he obtained from other investors. Hudgins is alleged to have used the remainder of the money to support an exorbitant lifestyle which consisted of owning several antique sports cars, Tiffany jewelry, a 300-acre ranch and an airplane. In the civil suit, U.S. District Judge Leonard Davis of the Eastern District of Texas approved a settlement in which Hudgins agreed to repay the investors and pay a $15 million fine to the CFTC.
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