For Release: May 21, 2008
Federal Court Order Freezes Assets of Texas Resident George D. Hudgins in CFTC Anti-Fraud Action
Defendant Charged with Defrauding Investors Through Operation of a Commodity Pool that Suffered Losses of More Than $25 Million from 2005 through 2007
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced today that it obtained a federal court order freezing the assets of defendant George D. Hudgins, who resides in Nacogdoches, Texas. The order also prohibits the destruction of documents.
The court’s order, entered on May 13, 2008, in the U.S. District Court for the Eastern District of Texas (Tyler), arises from a CFTC complaint filed the same day charging Hudgins (d/b/a George D. Hudgins L.L.C.) with fraudulently soliciting the general public to participate in the 3737 Financial L.P. commodity pool, also known as Hudgins Group and Hudg-Investments, which traded exchange-traded commodity futures and option contracts in violation of the anti-fraud provisions of the Commodity Exchange Act (CEA). The illegal activity has been ongoing since at least January 2005, according to the CFTC complaint.
Hudgins allegedly solicited pool participants using promotional packets, newsletters, group presentations, and face-to-face meetings. During these solicitations, Hudgins allegedly made numerous material misrepresentations and omissions of fact to induce pool participants and prospective participants to invest or remain invested in the pool. These included false representations about how long the commodity pool was in existence, the size of the commodity pool’s assets, and the historical profitability of the pool. For example, in a January 2005 promotional packet, Hudgins purportedly represented that the commodity pool had gross annual returns of 46 percent to 99 percent from 2000 through 2004. In truth, the pool did not exist until November 2004 and, therefore, had no “returns’ from 2000 through October 2004. Similarly, in a January 2007 presentation to investors and potential investors, Hudgins represented that the pool had annual profits of 53.33 percent in 2005 and 22.5 percent in 2006, when, as alleged, the pool accounts suffered losses of $9,445,989.11 in 2005 and $11,192,620.05 in 2006. As well, during that same presentation, Hudgins purportedly declared that, as of that time, the pool had an investment portfolio of approximately $80 million, when, in fact, the net value of the accounts associated with the pool was negative $100,199.38; i.e., the accounts were operating at a loss.
As alleged, the accounts associated with the pool suffered losses of more than $25 million from 2005 through 2007.
“Cases like this accentuate the need for investors to educate themselves regarding the individuals and institutions to which they entrust their money. Through their respective websites, the CFTC and the NFA empower investors with resources to perform due diligence before they invest in futures and options. There is nothing more dangerous to a scam artist than an informed investor,” said Gregory Mocek, Director of Enforcement.
The CFTC complaint also alleges that defendant is liable for failure to register with the CFTC as a commodity pool operator.
In its continuing litigation against Hudgins, the CFTC is seeking preliminary and permanent injunctive relief, the return of funds to defrauded participants, the repayment of ill-gotten gains, and civil monetary penalties for each violation of the CEA.
The CFTC appreciates the assistance of the United States Attorney’s Office for the Eastern District of Texas in this matter.
The following CFTC Division of Enforcement staff members are responsible for this case: Kathleen Banar, Kim Bruno, James Deacon, Michael Tallarico, Bill Small, Michelle Bougas, Rick Glaser, and Richard Wagner.
Last Updated: May 21, 2008