A Madison man has been indicted for allegedly defrauding investors of an alcoholic beverage company.
Brian Hughes, 56, of Madison, faces charges of wire fraud, illegal monetary transactions, money laundering and tax evasion.
According to the U.S. Attorney’s office, an indictment was returned on Jan. 12, and sealed until Hughes’ arrest on Thursday.
Hughes entered a “not guilty” plea in a videoconference proceeding before U.S. Magistrate Judge Robert M. Spector. Hughes remains in custody pending a detention hearing Jan. 21.
The indictment claims Hughes in 2015 founded the business Handcrafted Brands LLC, for the purpose of raising money to purchase the alcoholic beverage company Salute American Vodka.
The Secretary of the State’s office lists both businesses as being based currently at 54 East Industrial Rd., Branford. Salute’s website indicates it was acquired by Handcrafted Brands in 2016.
Hughes in 2015 began soliciting and obtaining funds from investors, reporting that the money would be used to buy and operate Salute, documents show.
Many investors provided several thousand dollars in funds. Prosecutors claim Hughes represented to investors that they would be compensated with equity shares in the companies and he would not take a salary. The indictment alleges that Hughes instead diverted money for personal use. The government claims some investors were not compensated with any equity shares.
The indictment also alleges Hughes solicited investments on behalf of a company only identified as “Company 1” in court documents, though he had no official relationship with it. Prosecutors claim he also diverted these funds for personal use.
Prosecutors allege Hughes made “lulling” payments to investors. These were allegedly designed to encourage further investment by making investors believe their investments were yielding results. Instead, the lulling payments were funded by money from other investors, according to the government.
Hughes also faces charges he under-reported his income to the Internal Revenue Service for the 2015 to 2018 tax years.
Hughes’ attorney is listed as Assistant Federal Defender Carly Levenson, who declined to comment Friday.
Contact Michelle Tuccitto Sullo at msullo@newhavenbiz.com.