The US Commodity Futures Trading Commission has charged Sidney S. Hanson, Charlotte M.
The US Commodity Futures Trading Commission has charged Sidney S. Hanson, Charlotte M. Hanson and their companies Queen Shoals, Queen Shoals II and Select Fund, all of Charlotte, North Carolina, with operating a Ponzi scheme involving more than USD22m in connection with off-exchange foreign currency futures trading.
The CFTC’s complaint, filed on 4 August 2009, names the following entities, all operating out of Charlotte, as relief defendants because they allegedly received funds as a result of the defendants’ fraudulent conduct and have no legitimate entitlement to the funds: Secure Wealth Fund; Heritage Growth Fund; Dominion Growth Fund; Two Oaks Fund; Dynasty Growth Fund; and Queen Shoals Group.
On 7 August 2009, the US District Court for the Western District of North Carolina entered an order that freezes the assets of defendants and relief defendants and allows the CFTC to seize and preserve all relevant records.
The defendants and relief defendants agreed to the entry of a consent order of permanent injunction that imposes permanent injunctions against further trading and violations of federal commodities laws.
The order also requires the defendants to pay restitution to customers, disgorge all ill-gotten gains and to pay civil monetary penalties – all in amounts to be determined by the court at a later date.
According to the CFTC’s complaint, the defendants, from at least 18 June 2008 to the present, fraudulently solicited at least USD22.5m from individuals and entities to trade forex, among other things, on their behalf. The defendants allegedly operated a Ponzi scheme and misappropriated millions of dollars.
In both their personal and website solicitations, the defendants falsely claimed success in trading forex, guaranteed customers profits through the use of silver and gold bullion-backed ‘non-depletion accounts,’ and represented that there would be no risk to customers’ principal investment, the complaint alleges. The defendants allegedly falsely represented that a non-depletion account guarantees that the customer will receive the return of invested principal and the promised ‘interest’.
The complaint also alleges that the defendants lured prospective customers with promises of returns of eight per cent to 24 per cent through customers investing via promissory notes for terms of one to five years; customers who committed to the longest monthly terms were promised the greatest ‘profits’. The defendants claimed to pool customers’ funds and use the profits purportedly generated by trading forex, along with gold and silver bullion, to guarantee payments to customers at the end of the five-year promissory note period.
In reality, the complaint alleges, the defendants deposited little or no customer funds into forex trading accounts. Rather, the defendants misappropriated customer funds to finance the Hansons’ personal expenses, including the purchase of an 88-acre farm, private plane rentals and luxury vacations. Defendants also allegedly used customer funds for purported profit payments or the return of principal to existing customers, similar to a Ponzi scheme.
