Nacogdoches Businessman George D. Hudgins was accused by federal prosecutors in the Eastern District of Texas of perpetrating a $90 million Ponzi scheme, that victimized hundreds of investors nationwide.
Investigation by the securities law firm of Chapman & Associates determined that George D. Hudgins pretended to be a successful futures and options trader. He made numerous representations to investors regarding his past successes in trading various commodities and future indexes, according to documents filed in federal court. He falsely claimed past returns of between 22 and 99 percent annually, and a history of stellar profits for his investors. He put out an investment newsletter and organized investor banquets in Nacogdoches, Texas, according to court filings.
Chapman & Associates' research showed that, in reality, Hudgins's investment performance had been anything but stellar. Unbeknown to his victims, Hudgins had been consistently losing money in the commodities markets, and had squandered the investor funds to buy luxury items for personal use. The supposed "profits" that were distributed to earlier investors came from deposits by later investors, as in any Ponzi scheme.
To maintain the illusion of success, Hudgins falsified tax forms that showed how profitable his operation was, and mailed them to investors.
Hudgins was able to perpetrate his scheme so long as new investors deposited money with him, according to John S. Chapman, a securities attorney. When the flow of money slowed down, he became unable to pay the promised returns to earlier investors, and his scheme collapsed, leaving hundreds of victims with nothing but fictitious account statements and paper profits.
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