Case 6:08-cv-00187-LED Document 1 Filed 05/13/2008 Page 1 of 20

iN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION

COMMODITY FUTURES TRADING

COMMISSION,
SUBMITTED UNDER SEAL
Plaintiff,

v.

GEORGE D. HUDGINS, individually and dba: CIVIL ACTION NO.: 6:08cv187

GEORGE D. HUDGINS, L.L.C. .
COMæLAINT FOR PERMNENT
Defendants INJUCTION, CIVIL MONETARY
PENALTIES, AND OTHER EQUITABLE
RELIEF

Plaintiff, Commodity Futures Trading Commission ("Commission"), by its attorneys,

alleges as follows:

I. SUMMARY

i. From at least January 2005 to the present ("relevant period"), Defendant George

D. Hudgins dba George D. Hudgins L.L.C. ("Hudgins") fì.audulently solicited members of the

general public to pool together milions of dollars to trade futures contracts ("futures") and

options on futures contracts ("options") in violation of the anti-fraud provisions of the

Commodity Exchange Act ("CEA" or "the Act"), as amended, 7 U.S.C. §§ i et seq. (2002), and

Commission Regulations ("Regulations"), i 7 C.F .R. §§ i. i et seq. (2008), promulgated

thereunder.

2. In order to induce current and prospective pool participants to invest or reinvest,

Hudgins, as the unregistered commodity pool operator ("CPO") and general paiiner for the pool,

3737 Financial L.P. aka Hudgins Group aka Hudg-Investments ("3737 Financial" or the

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"commodity pool"), made numerous material misrepresentations and omissions, including,

among others:

(a) falsely representing that the commodity pool had a successful track record

trading futues and options since 2000, when, in fact, the commodity pool was not

even in existence until 2004;

(b) falsely representing, and grossly infating, the total amount of funds under

management and traded in the commodity pool;

(c) falsely representing the commodity pool's purorted historical profitability,

and grossly inflating any such profitability, when, in fact, Hudgins' trading in

futues and options resulted in losses exceeding $28 milion since December

2003;

(d) failing to disclose that Hudgins was trading pool paricipant money in his own

personal trading account and not in any trading account opened in the name of the

commodity pool; and

(t) issuing false statements regarding the purOlied "returs" of the commodity

pool in monthly and/or quaiierly newsletters and other promotional materiaL.

3. As a result, Defendant has engaged, is engaged, or is about to engage in acts and

practices in violation of Sections 4Q(1), 4b(a)(2)(i)-(iii), 4c(b), and 4m(1) of the Act, 7 U.S.C. §§

6Q(1), 6(b)(a)(2)(i)-(iii), 6c(b) and 6m(1), and Regulations 4.4l(a) and 33. 10(a)-(c), 17 C.F.R. §§

4.41 (a) and 33.l0(a)-(c).

4. Accordingly, pursuant to Section 6c ofthe Act, 7 U.S.C. § 13a-l, the Commission

brings this action to enjoin Defendant's unlawfl acts and practices and to compel his

compliance with the Act and Regulations. In addition, the Commission seeks civil monetary

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penalties and other equitable relief, including restitution to pool participants, disgorgement of

Defendant's il-gotten gains, a permanent trading ban, and such other relief as the Court may

deem necessary or appropriate.

5. Unless permanently restrained and enjoined by the Cour, Defendant is likely to

continue to engage in the ilegal acts and practices alleged in this Complaint, as more fully

described below.

II. JURISDICTION AND VENUE

6. The Act establishes a comprehensive system for regulating the purchase and sale

of futures and options. The Court has jurisdiction over this action pursuant to Section 6c of the

Act, 7 U.S.C. § 13a-l, which authorizes the Commission to seek injunctive relief against any

person whenever it shall appear to the Commission that such person has engaged, is engaging, or

is about to engage in any act or practice constituting a violation of any provision of the Act or

any rule, regulation, or order thereunder.

7. Venue properly lies with this Cour pursuant to Section 6c( e) of the Act,

7 U.S.C. § 13a-l(e), in that Defendant is found in, inhabits, or transacts business in this District,

and the acts and practices in violation of the Act and Regulations have occured, are occurring, or

are about to occur within this District, among other places.

III. PARTIES

8. The Commodity Futures Trading Commission is a federal independent

regulatory agency charged with the administration and enforcement of the CEA, 7 U.S.C. §§ 1 et

seq., and the Regulations thereunder, 17 C.F.R. §§ 1.1 et seq.

9. George D. Hudgins is an individual who resides at 3737 Skyline Drive,

Nacogdoches, Texas. Hudgins also does business as "George D. Hudgins LLC," a Texas limited

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liability company, created on November 12,2004 and also located at 3737 Skyline Drive,

Nacogdoches, Texas. Hudgins, individually and dba as George D. Hudgins LLC (the general

parner of 3737 Financial), controls the day-to-day operations of the commodity pool, including

making the commodity pool's trading decisions and opening personal trading accounts at a

registered futures commission merchant ("FCM") for the purpose of trading on behalf of the

commodity pool. Hudgins has never been registered with the Commission as a CPO or in any

other capacity.

iv. STATUTORY BACKGROUND

10. A "commodity pool" is defined in Regulation 4.l0(d)(l), 17 C.F.R. § 4.l0(d)(1),

as any investment trust, syndicate or similar forni of enterprise operated for the purose of

trading commodity interests.

11. A "commodity pool operator" is defined in Section la(5) of the Act, 7 U.S.C. §

1 (a)( 5), as any person engaged in a business that is of the nature of an investment trust,

syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts or

receives from others, funds, securities, or property, either directly or through capital

contributions, the sale of stock or other forms of securties or otherwise, for the purose of

trading in any commodity for future delivery on or subject to the rules of any contract market or

derivatives transaction execution facility.

v. FACTS

A. Hud2ins' Rosenthal Collns Group Accounts

12. 3737 Financial is a Texas limited partnership created on November 12, 2004 and

located at 3737 Skyline Drive, Nacogdoches, Texas. Hudgins receives, accepts and pools funds

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from members of the public to trade futures and options through 3737 FinanciaL. Hudgins is the

unegistered CPO of 3737 FinanciaL.

13. Rather than opening a commodity trading account with a FCM in the name ofthe

commodity pool-- here, 3737 Financial-- Hudgins opened multiple trading accounts in his own

name and traded the fuds invested in 3737 Financial in these accounts.

14. On December 15,2003, Hudgins opened a trading account (hereinafter, Account

"00") in the name "George D. Hudgins," at Rosenthal Collins Group L.L.C. ("RCG"), a

registered FCM. Through Account "00," Hudgins traded futures and options, including contracts

for silver, sugar, and the S&P 500 index.

15. Thereafter, from 2005 to 2007, Hudgins opened a total of six additional trading

accounts with RCG in the name "George D. Hudgins" (hereinafter, Accounts "01," "02," "03,"

"04," "OS," and "06").

(a) Account "01" was opened in November 2005. Through that Account,

Hudgins traded futues and options, including contracts for T - Bonds, silver,

crude oil and the S&P 500 index.

(b) Accounts "02" and "03" were opened in January 2006. Hudgins did no

trading in Account "02". Through Account "03", Hudgins traded futures and

options in the S&P 500 index.

(c) Account "04" was opened in September 2006. Through that Account,

Hudgins traded futues in the S&P 500 index.

(d) Account "OS" was opened in September 2007. Through that Account,

Hudgins traded futures, including contracts for crude oil, cotton, the S&P 500

index, and coffee.

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(e) Account "06" was opened in July, 2004. Through that Account, Hudgins

traded futures, including contracts for crude oil, NASDAQ index and S&P 500

index.

B. Hud2ins Operates 3737 Financial as a Commodity Pool

16. On November 14,2004, Hudgins created 3737 FinanciaL. Beginning in at least

January 2005, Hudgins began operating, and soliciting the public to invest, or remain invested, in

the commodity pool; i.e., he solicits individual paiiicipants to write checks to 3737 Financial,

tells them that their money will be pooled with funds from other pool participants and that

Hudgins will use the money to trade futures and options contracts on behalf of all pool

paricipants through a RCG trading account.

17. Pool paricipants' checks are deposited in 3737 Financial's bank account at

BancorpSouth in Nacogdoches, Texas. Thereafter, on information and belief, Hudgins transfers

some or all of pool participants' fuds from 3737 Financial's bank account into a different bank

account in the name of George D. Hudgins located at BancorpSouth in Nacogdoches, Texas, and,

subsequently, wires some or all of pool participants' funds from that bank account at

BancorpSouth to his personal trading accounts at RCG located in Chicago, Ilinois, through

which Hudgins trades commodity futures and options.

18. Contemporaneously with investing in the commodity pool, pool participants enter

into a one page agreement with 3737 Financial "for the purpose oftrading S&P (500) futue(s)

and other investments as George D. Hudgins, General Partner, sees fit." The one page agreement

also provides "Hudgins will trade for (investor's name) benefit as a partner, and profits will by

split 80% (investors name) and20% Hudgins." ,

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C. Hud2ins' Fraudulent Solicitations of Participants

19. Since as early as January 2005, Hudgins solicited pool paiiicipants and

prospective pool participants to invest, or remain invested, in the commodity pool through

promotional packets, newsletters, group presentations and face-to-face meetings. In these

solicitation materials and presentations, Hudgins makes numerous material misrepresentations

and omissions to induce pool participants and prospective participants, to invest, or remain

invested in the fund, including false representations about the length of time the pool had been in

existence, the historical profitability of the pool, and the size of the commodity pool's assets.

(i). Januarv 2005 Promotional Packet

20. For example, in January 2005, Hudgins created and provided to at least one pool

paricipant a promotional packet entitled "Hudg-Investments(:) Making Money in a Bull or Bear

Market," which discussed, among other things, the purported historical performance of the

commodity pooL. In the promotional packet, Hudgins stated that the commodity pool had gross

returns of:

. 99% for 2000,

. 55% for 2001,
. 57% for 2002,
. 46% for 2003,
. 4 7% for 2004, and
. 8.13% for January, 2005.

21. These statements are false and misleading because:

(a) 3737 Financial did not exist until November 2004, and thus the commodity

pool had no "returns" during the time period 2000 to October, 2004; and

(b) for the years 2003, 2004, and 2005, RCG trading account records in the name

of George D. Hudgins show that, rather than having the net returns claimed, the

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trading accounts suffered losses in: December 2003 of $42,256.26; the full 2004

calendar year of$1,6l4,307.97; and January 2005 of$14l,780.51.

22. Hudgins further represented in the promotional packet that 3737 Financial invests

in S&P 500 futures, currencies, U.S. treasury bonds, gold and silver and, as of January 2005, had

an investment pOlifolio of approximately $23 Milion. In fact, as of January 2005, the only

accounts in existence at RCG in the name "George D. Hudgins" -- Account "00" and Account

"06" - only had a net value of $75,713.86.

23. Hudgins made these representations regarding the commodity pool in the

promotional packet knowing them to be false or with reckless disregard as to their truth.

(ii). Newsletters

24. Hudgins created and provided to pool participants and prospective pool

participants monthly and quaiierly newsletters entitled "The Hudg-Report" that discussed the

purorted historical performance of the commodity pool. In particular in the February 2005,

February 2006 and Fouiih Quarter 2006 Hudg-Reports, Hudgins represented, among other

things, that the commodity pool had a net profit of:

. 8.13% for January 2005,

. approximately 3% for January 2006, and
. 29.27% for Fourth Quarter 2006, respectively.

25. Similar to the retus listed in the promotional packet, these representations were

false and misleading. RCG trading account records in the name George D. Hudgins show a loss

in January 2005 of$14l,780.5l, a loss in January 2006 of$66l,977.7l and a loss in Fourth

Quarter 2006 of $988,157.24.

26. Hudgins made these representations regarding the commodity pool in the

newsletters knowing them to be false or with reckless disregard as to their truth.

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(¡¡¡). Januarv 2007 Presentation

27. In January, 2007 Hudgins made a presentation during an annual meeting of pool

participants and prospective pool participants in Nacogdoches, Texas (the "January 2007

presentation"). During the presentation, Hudgins made, among others, the following material

misrepresentations and omissions:

(a) Hudgins represented that the commodity pool had a net profit of99% for

2000,54.96% for 2001,57.12% for 2002, 45.86% for 2003 and 46.79% for 2004.

These representations are false and misleading for the reasons set forth in

paragraph 21, above. Additionally, Hudgins represented that the commodity pool

had profits of 52.33% for 2005 and 22.5% for 2006. These representations are

false because in 2005 and 2006 the RCG trading accounts suffered losses of

$9,445,989.1 1 and $11,192,620.05, respectively;

(b) Hudgins represented that the commodity pool, and his trading on behalf of the

commodity pool, did not need to be regulated, but failed to disclose that in fact

the operation of commodity pools is regulated by the Commission and that he was

required to be registered as a CPO;

(c) Hudgins represented that the commodity pool's trading account was at RCG,

but failed to disclose that no 3737 Financial account existed at RCG and that the

only accounts at RCG were Hudgins' personal trading accounts;

(d) Hudgins represented that, as of January 2007,3737 Financial had an

investment pOlifolio of approximately $80 Milion and that there were about 100

pool participants. In fact, at that time, the net value of Hudgins' trading accounts

at RCG in the name of George D. Hudgins was negative $100,199.38.

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28. Hudgins made these representations regarding the commodity pool during the

presentation knowing them to be false or with reckless disregard as to their truth.

(iv). Februarv 2008 Meetinf! with Three Prospective Pool Participants

29. In or about January 2008, one prospective pool participant learned about-Hudgins

and the commodity pool through several pool participants. The prospective pool participant

reviewed the Hudg-Report newsletters dated February 2005, February 2006, Second Quarter

2006, Third Quaiier 2006 and Fourth Quarter 2006 as well as the January 2005 promotional

packet that discussed, among other things, the purportedly large returs on investments in the

commodity pooL.

30. This prospective pool participant also learned that Hudgins had a DVD recording

of the January 2007 presentation, to pool paiiicipants and prospective pool participants.

31. The prospective pool participant requested via telephone and obtained via the

U.S. mail a copy of the DVD. After reviewing it, the prospective pool participant and two other

prospective pool participants met with Hudgins in early February 2008 (the "February 2008

meeting") in his office located at 3737 Skyline Drive, Nacogdoches, Texas, the same address as

his primaiy residence and 3737 FinanciaL.

32. At this meeting, Hudgins told the three prospective pool participants that he trades

in futures, including futures on crude oil, gold, cunency, pork bellies and grain, and that since

2000, the commodity pool had made a profit each year. In particular, Hudgins stated that in

2007, the commodity pool made a net profit of 57%, that there were at least 200 individuals

invested in the commodity pool, and that while several of these investors had hundreds of

thousands of dollars invested in 3737 Financial, others had milions of dollars invested.

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33. Hudgins also represented duiing the February 2008 meeting that 3737 Financial

had a present value of approximately $200 Million, that half of that consisted of Hudgins'

personal money and that all trades for the commodity pool were cleared through RCG. He

represented further that in January 2007 the pool had a value of$100 Milion.

34. Hudgins told the three prospective pool pai1icipants that he required each to invest

a minimum of$lOO,OOO in the commodity pooL. Hudgins also stated that his operating fee was

20% of net profit.

35. Hudgins informed the three prospective pool participants that because 3737

Financial was now worth $200 Millon it was getting too big to handle. As such he was "fixing

to shut this thing down," "stop taking anymore money," and even "start paying out some of the

profits" rather than reinvest them into 3737 FinanciaL.

36. During the meeting, two of the prospective pool participants each wrote a check

payable to 3737 Financial in the amount of$100,000. Hudgins, as general partner of3737

Financial, then executed separate one page agreements with each of the investors acknowledging

receipt ofthe $100,000 and agreeing to split the profits with 80% going to the pool participants

and 20% going to Hudgins. At least one ofthe checks was subsequently deposited in the account

of3737 Financial at BancorpSouth Bank, Nacogdoches, Texas.

37. Similar to the representations Hudgins made in the promotional packet, the

newsletters and during the January 2007 presentation, the representations made at the February

2008 meeting were false and misleading. In particular, rather than making a profit of 57% for

2007, RCG trading account records in the name George D. Hudgins show that the commodity

pool suffered a loss in 2007 of $5,077,748.50. Further, as of January 31, 2008, the total net value

of the investments in the RCG accounts in the name George. D. Hudgins was $4,498,850.45

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rather than the approximately $200 Millon that Hudgins represented at the February 2008

meeting.

38. Hudgins made these representations regarding the commodity pool in the

February 2008 meeting knowing them to be false or with reckless disregard as to their truth.

D. Value of Hud2ins' Accounts at RCG

39. As of January 31, 2007, the total net value of the investments in RCG accounts in

the name George D. Hudgins was negative $100,199.38; i.e., the accounts were operating at a

loss. This is in stark contrast to Hudgins' representation at the January 2007 presentation to pool

participants and prospective pool participants that the commodity pool contained, at that time,

approximately $80 Milion, and the February 2008 meeting in which Hudgins represented the

value ofthe èommodity pool to have been $100 milion in Januaiy 2007.

40. As of January 31, 2008, the total net value of the investments in the RCG

accounts in the name George D. Hudgins was $4,498,850.45. This is instark contrast to

Hudgins' representation at the February 2008 meeting that the commodity pool contained

approximately $200 Milion.

41. The relationship between what Hudgins told pool participants and prospective

pool participants in his varied solicitations and actual RCG trading account values is detailed in

the chart below:

Time peiiod Hudgins' Actual losses

Misrepresentations as to
profit as a percent
2000 99% 3737 Financial did not exist
2001 55% 3737 Financial did not exist
2002 57% 3737 Financial did not exist
2003 46% 3737 Financial did not exist; however,
losses suffered in the RCG accounts in

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December 2003 were $42,256.26

2004 46.79% 3737 Financial did not exist until
November 2004; however, losses suffered
in the RCG accounts were $1,614,307.97
January 8.13% Losses suffered in the RCG accounts were
2005 $141,780.51
2005 52.33% Losses suffered in the RCG accounts were
$9,445,989.11
Januar 3% Losses suffered in the RCG accounts were
2006 $661,977.71
Fourh 29.27% Losses suffered in the RCG accounts were
Quarter $988,157.24
2006
2006 22.5% Losses suffered in the RCG accounts were
$11,192,620.05
2007 57% Losses suffered in the RCG accounts were
$5,077,748.5

42. While on April 30, 2008, the RCG accounts in the name of George D. Hudgins

show a net liquidating value of$8,197,044.94, in actuality Hudgins has lost a total of

$28,966,527.71 in the RCG accounts from December 2003 through April 2008 trading futures

and options.

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VI. VIOLATIONS OF THE ACT AND REGULATIONS

COUNT ONE

Fraud Bv Commodity Pool Operator

(Violations of Section 4Q(I) of the Act, 7 U .S.C. § 6Q(I),

and Regulation 4.41(a), 17 C.F.R. § 4.41(a))

43. Paragraphs 1 through 42 are realleged and incorporated herein.

44. Section 4Q(1) of the Act, 7 V.S.C. § 6Q(1), prohibits CPOs from using the mails or

any other means of interstate commerce to:

(A) employ any device, scheme, or artifice to defraud any client or

participant or prospective client or participant; or

(B) engage in any transaction, practice, or course of business which

operates as a fraud or deceit upon any client or participant or
prospective client or participant.

45. Regulation 4.41

(a) provides that no CPO may advertise in a manner that:

(1) Employs any device, scheme or artifice to defraud any pai1icipant or client or
prospective participant or client; or

(2) Involves any transaction, practice, or course of business which operates as a

fraud or deceit upon any participant or client or any prospective participant or
client.

46. During the relevant period, Hudgins acted as a CPO by soliciting, accepting or

receiving funds from others and engaging in a business that is of the natue of an investment

trust, syndicate, or similar form of enterprise, for the purose of trading in futures and options on

futures.

47. As set out in paragraphs 1 through 42, during the relevant period, Hudgins

employed a device, scheme or artifice to defraud pool pai1icipants and prospective pool

paricipants or engaged in a transaction, practice or course of business, including through

advertising in newsletters, seminars, and promotional packages, which operated as a fraud or

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deceit upon commodity futures and options pool participants and prospective commodity futures

and options pool participants in violation of Section 4Q(1) of the Act, 7 U.S.C. § 6Q(1) and

Regulation 4.41
(a), 17 C.F.R. § 4.41.(a).

48. Each misrepresentation or omission of material fact, actual or attempted act to

cheat, defraud, or deceive, including but not limited to those specifically alleged herein, is

alleged as a separate and distinct violation of Section 4Q(1) of the Act, 7 U.S.C. § 6Q(1), and

Regulation 4.41
(a), 17 C.F.R. § 4.41(a).

COUNT TWO

Fraud in Connection with a Futures Contract

(Violations of Sections 4b(a)(2)(i)-(iii) of the Act, 7 U.S.c. §§ 6b(a)(2)(i)-(ii))

49. Paragraphs 1 through 48 are realleged and incorporated herein.

50. Section 4b(a)(2) of the Act, 7 U.S.C. § 6b(a)(2), makes it unlawfl

for any person, in or in connection with any order to make, or the

making of, any contract of sale of any commodity for futue
delivery, made, or to be made, for or on behalf of any other person
if such contract for futue delivery is or may be used for (A)
hedging any transaction in interstate commerce in such commodity
or the products or bypro ducts thereof, or (B) determining the price
basis of any transaction in interstate commerce in such
commodity, or (C) delivering any such commodity sold, shipped,
or received in interstate commerce for the fulfillment thereof-(i)
to cheat or defraud or attempt to cheat or defraud such other
person; (ii) wilfully to make or cause to be made to such other
person any false report or statement thereof, . . . ( or); (iii) wilfully
to deceive or attempt to deceive such other person by any means
whatsoever in regard to any such order or contract or disposition
or execution of any such order or contract, or in regard to any act
of agency performed with respect to such order or contract for
such person.

51. As set out in paragraphs 1 through 42, during the relevant period, Hudgins

cheated or defrauded or attempted to cheat or defraud, wilfully made or caused to be made false

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reports about the purorted profitability of 3737 Financial in monthly or quarterly newsletters

and other promotional material, and willfully deceived or attempted to deceive pool participants

and prospective pool participants by making misrepresentations of material facts, and omitting

material facts in violation of Sections 4b(a)(2)(i)-(iii) of the Act, 7 U.S.C. §§ 6b(a)(2)(i)-(iii).

52. Each misrepresentation or omission of material fact, actual or attempted act to

cheat, defraud, or deceive, including but not limited to those specifically alleged herein, is

alleged as a separate and distinct violation of Section 4b(a)(2)(i)-(iii) of the Act, 7 U.S.C. §

6b( a)(2)(i)-(iii).

COUNT THREE

Fraud in Connection with an Options Contract

(Violations of Section 4c(b) of the Act, 7 U.S.C. § 6c(b), and

Regulations 33.10(a)-(c), 17 C.F.R. §§ 33.10(a)-(c))

53. Paragraphs 1 through 52 are realleged and incorporated herein.

54. Section 4c(b) ofthe Act, 7 U.S.C. § 6c(b), makes it unlawfl to offer to enter into,

enter into, or confirm the execution of, any transaction involving any commodity regulated under

the character of, or is commonly known to the trade as, an "option,"

b , "", ,
the Act which is of

"privileae " "indemnity" "bid" "offer" "put" "call" "advance guaranty" or "decline

guaranty," contrary to any rule, regulation, or order of the Commission prohibiting any such

transaction or allowing any such transaction under such terms and conditions as the Commission

shall prescribe.

55. Regulations 33.10(a)-(c), 17 C.F.R. §§ 33.10(a)-(c), make it unlawful for any

person, directly or indirectly, (a) to cheat or defraud or attempt to cheat or defraud any person;

(b) to make or cause to be made any false report or statement, or (c) to deceive or attempt to

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deceive any other person by any means whatsoever, in or in connection with an offer to enter

into, the entry into, or the confirmation of the execution of, any commodity option transaction.

, 56. As set out in paragraphs 1 through 42, duiing the relevant period, Hudgins

violated Section 4c(b) of the Act, 7 U.S.C. § 6c(b), and Sections 33.10(a)-(c) of the Regulations,

17 C.F.R. §§ 33.10(a)-(c), in that, in connection with offers to enter into, the entry of, or the

confirmation of the execution of, commodity options transactions, Hudgins cheated, defrauded,

or deceived, or attempted to cheat, defraud or deceive, other persons, by making false, deceptive

or misleading representations of material facts and by failing to disclose material facts, and by

making or caused to be made false reports about the purported profitability of3737 Financial in

monthly or quarterly newsletters and other promotional mateiial.

57. Each misrepresentation or omission of material fact, actual or attempted act to

cheat, defraud, or deceive, including but not limited to those specifically alleged herein, is

alleged as a separate and distinct violation of Section 4c(b) of the Act, 7 U.S.C. § 6c(b), and

Regulations 33.10(a)-(c), 17 C.F.R. §§ 33.10(a)-(c).

COUNT FOUR

Failure to Re2ister As a Commodity Pool Operator

(Violation of Section 4m(1) of the Act, 7 U.S.C. § 6m(I))

58. Paragraphs 1 through 57 are realleged and incorporated herein.

59. Section 4m(1) of the Act, 7 U.S.C § 6m(1), provides that it is unlawful for any

CPO, unless registered under the Act, to make use of the mails or any means or instrumentality

of interstate commerce in connection with his business as a CPO.

60. As set out in paragraphs 17 and 31, during the relevant period, Hudgins has used

the mails or instrumentalities of interstate commerce in or in cOlliection with a commodity pool

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as a CPO while failing to register as a CPO, in violation of Section 4m(1) ofthe Act, 7 U.S.C. §

6m(1).

61. Hudgins does not qualify for a registration exemption under either the Act or

Regulations.

VII. RELIEF
WHEREFORE, the Commission respectfully requests that the Court, as authorized by

Section 6c of the Act, 7 U.S.C. § 13a-l, and pursuant to its own equitable powers, enter:

(a) an order finding that Defendant violated Sections 40(1), 4b(a)(2)(i)-(iii), 4c(b) and

4m(1) of the Act, 7 U.S.C. §§ 60(1), 6b(a)(2)(i)-(iii), 6c(b) and 6m(1) and Regulations 4.41
(a)

and 33.10(a)-(c), 17 C.F.R. §§ 4.4 1 (a) and 33.1O(a)-(c);

(b) an order of permanent injunction prohibiting Defendant, and any other person or

entity associated with him, including any successor thereof, from engaging in conduct violative

of the sections of the Act and Regulations that he has been alleged to violate;

(c) an order of permanent injunction prohibiting Defendant from engaging, directly

or indirectly, in any activity related to trading in any commodity, as that term is defined in

Section la(4) of the Act, 7 U.S.C. § la(4) (commodity interest), including but not limited to, the

following:

1. trading on or subject to the rules of any registered entity, as that term is

defined in Section la(29) of the Act, 7 U.S.C. § la(29);

2. engaging in, controlling or directing the trading for any commodity

interest account for or on behalf of any other person or entity, whether by power of attorney or

otheiwise;

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3. soliciting or accepting any funds from any person in connection with the

purchase or sale of any commodity interest;

4. entering into any commodity interest transactions for his own personal

account, for any account in which he has a direct or indirect interest and/or having any

commodity interests traded on his behalf; and

5. engaging in any business activities related to commodity interest trading.

(d) an order of permanent injunction from applying for registration or claiming

exemption from registration with the Commission in any capacity, and engaging in any activity

requiring such registration or exemption from registration with the Commission, except as

provided for in Regulation 4.14 (a)(9), 17 C.F.R. § 4.l4(a)(9), or acting as a principal, agent or

any other officer or employee of any person registered, exempted from registration or required to

be registered with the Commission, except as provided for in Regulation 4.14 (a)(9), 17 C.F.R. §

4. 14(a)(9);

(e) an order directing Defendant, as well as any other person or entity associated with

him, including any successor thereof, to disgorge, pursuant to such procedure as the Coui1 may

order, all benefits received from the acts or practices which constitute violations of the Act or

Regulations, as described herein, and interest thereof from the date of such violations;

(t) an order directing Defendant, as well as any other person or entity associated with

him, including any successor thereof, to make full restitution, pursuant to such procedure as the

Cour may order, to every pool participant whose fuds were received by them as a result of acts

and practices which constitute violations of the Act and Regulations, as described herein, and

interest thereon from the date of such violations;

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(g) an order imposing upon Defendant a civil penalty pursuant to § 6c(d)(1), 7 U.S.C.

13a-1 and Regulation 143.8, 17 C.F.R. § 143.8; and

(h) an order for such other and fui1her remedial ancilar relief as the Cour may deem

appropriate.

May (2, 2008 Respectfully submitted,

PLAINTIFF UNITED STATES COMMODITY

FUTURES TRADING COMMISSION

Kim G. Bruno, Counsel to the Director

(D.C. Bar No. 389899)
kbruno(Çcftc.gov (pro hac vice admission pending)

United States Commodity Futures Trading

Commission
Division of Enforcement
1155 21st Street, NW,
Washington, D.C. 20581
Telephone: (202) 418-5000
Fax: (202) 418-5531

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