New Canaan resident Brian Hughes, age 58, formerly of Madison, was sentenced to two and a half years in prison on Monday, March 6 for defrauding investors of two companies, and for tax evasion, the US Attorney's Office for the District of Connecticut announced.
The charges stem back to March of 2015 when Hughes founded Handcrafted Brands, LLC (HBC), in order to raise money to purchase the alcoholic beverage company Salute American Vodka.
For the purpose of purchasing the company and then developing it, Hughes would solicit and receive funds from dozens of investors. However, upon receiving his first investment in the amount of $150,000, Hughes instead used it to pay his taxes and his American Express credit card expenses, federal officials said.
Even after HBC bought Salute for $450,000, Hughes would still solicit funds from investors and use hundreds of thousands of dollars for expenses that were not related to Salute, even using money from one investor to pay back another earlier investor a "return" on their earlier investment, known as a "lulling" payment.
In addition to soliciting funds for Salute, Hughes would also solicit investments on behalf of another company that he had no official relationship with and therefore could not raise capital on their behalf as a result. Hughes would also use these investments for personal expenses, in addition to using them to pay back earlier investors and for business related to Salute.
Hughes also evaded tax obligations during this time by severely underreporting his income to the Internal Revenue Service between the 2015 and 2018 tax years, resulting in a tax loss of $470,880.
On Jan. 14, 2021, Hughes was arrested. He pleaded guilty to one count of wire fraud, one count of making an illegal monetary transaction, and one count of tax evasion on Wednesday, Feb. 15, 2022.
In addition to his prison sentence, Hughes was also ordered to pay full restitution to investors in both HCB and the company he claimed to have an official relationship with, as well as the IRS, in the amount of $2,991,880.
He will also be subject to three years of supervised release after his sentence.
Hughes is currently living in New Canaan on a $250,000 bond and is required to report to prison to begin his sentence on Wednesday, Sept. 6.
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