The US Commodity Futures Trading Commission (CFTC) has obtained a federal court supplemental consent order requiring defendants Sidney S Hanson, Charlotte M Hanson, and their companies, Queen Shoals, LLC, Queen Shoals II, LLC, and Select Fund, LLC, to pay USD24 million in restitution and civil monetary penalties for defrauding customers and misappropriating millions of dollars in a foreign currency (forex) Ponzi scheme.
In addition, the supplemental consent order, entered by Judge Robert J. Conrad, Jr. of the US District Court for the Western District of North Carolina on October 28, 2011, requires the following relief defendants to disgorge ill-gotten gains totaling USD23.3 million because they received funds as a result of the defendants’ fraudulent conduct to which they had no legitimate entitlement: Secure Wealth Fund, LLC; Heritage Growth Fund, LLC; Dominion Growth Fund, LLC; Two Oaks Fund, LLC; Dynasty Growth Fund, LLC; and Queen Shoals Group, LLC.
Simultaneously with the filing of the complaint in 2009, the defendants and relief defendants consented to permanent injunctions against further violations of federal commodities laws and against further trading. The supplemental consent order enters the specific amounts of both the customer restitution and the civil monetary penalties that the defendants are ordered to pay and, similarly, enters the amount of disgorgement required of the relief defendants.
According to the CFTC’s complaint, starting in at least June 2008 and continuing through the present, the defendants fraudulently solicited at least USD22 million from individuals and/or entities for the purported purpose of trading off-exchange forex on their behalf. As alleged, the defendants operated a Ponzi scheme and misappropriated millions of dollars of customer funds.
In their personal and website solicitations at www.queenshoals.com, defendants falsely claimed success in trading forex, guaranteed customers profits through use of “non-depletion accounts,” represented that there would be no risk to customers’ principal investment, and lured prospective customers with promises of returns of 8 to 24 per cent, according to the complaint.
Defendants also were charged with falsely representing that they profitably traded forex on behalf of customers and guaranteed both the principal and the promised interest via “non-depletion” accounts backed by gold and silver bullion. The defendants falsely represented that a “non-depletion” account guaranteed the customer the return of his principal and the promised “interest.” The defendants claimed to pool customers’ funds and then to use the profits 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, however, defendants deposited little or none of customers’ funds into forex trading accounts. The defendants misappropriated customer funds for personal uses or to make purported profit payments or return principal to existing customers, in the manner akin to a Ponzi scheme. The complaint also alleged the defendants used customer funds to finance the Hansons’ personal expenses, such as the purchase of an 88-acre farm, private plane rentals, and luxury vacations, among other things.
Sidney Hanson is currently a federal prisoner awaiting sentencing on 31 March, 2011, in US District Court for the Western District of North Carolina, Charlotte Division, having pleaded guilty to securities fraud and mail fraud in a criminal matter related to this fraudulent scheme.