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Former Madison Resident Sentenced to Prison for Defrauding Investors, Evading Taxes

Former Madison resident Brian Hughes, 58, was sentenced on March 6 by U.S. District Judge Janet Bond Arterton in New Haven to 30 months of imprisonment, followed by three years of supervised release, for defrauding investors of two companies, and for tax evasion.

According to court documents and statements made in court, in March 2015, Hughes founded Handcrafted Brands (HCB), LLC for the purpose of raising money to purchase Salute American Vodka (Salute), an alcoholic beverage company. Hughes subsequently solicited and received funds from dozens of investors ostensibly for the purchase and subsequent development of Salute.

Hughes used the first investment he received, in the amount $150,000, to pay his taxes and his American Express credit card expenses. Although HCB purchased Salute for $450,000 in June 2016, Hughes continued to solicit investments from investors and use hundreds of thousands dollars in invested funds for expenses unrelated to Salute. He also used funds to pay off an earlier investor under the guise of a return on a prior investment made by the earlier investor, something that is commonly known as a “lulling” payment.

Hughes also solicited investments purportedly on behalf of another company, which is identified in court documents as “Company-1.” In actuality, Hughes had no official relationship with Company-1 and could not raise capital on its behalf. Hughes spent the money he received for this investment on personal expenses, to pay earlier investors, and on business related to Salute.

Finally, Hughes evaded the assessment of his tax obligations for the 2015 through 2018 tax years by substantially under-reporting his income to the Internal Revenue Service (IRS), resulting in a tax loss of $470,880.

Hughes was arrested on Jan. 14, 2021. On Feb. 15, 2022, he pleaded guilty to one count of wire fraud, one count of making an illegal monetary transaction, and one count of tax evasion.

Judge Arterton ordered Hughes to pay full restitution to investors in both HCB and Company-1, and also to the Internal Revenue Service (IRS), in the total amount of $2,991,880. Hughes, who is released on a $250,000 bond and living in New Canaan, is required to report to prison on Sept. 6.

This matter was investigated by the Federal Bureau of Investigation and the IRS Criminal Investigation Division. The case was prosecuted by Assistant U.S. Attorney John T. Pierpont, Jr.