A federal grand jury in Hartford has returned a 17-count indictment charging Brian Hughes, 56, of Madison, with offenses stemming from an alleged scheme to defraud investors of an alcoholic beverage company, according to U.S. Attorney for the District of Connecticut John H. Durham, and David Sundberg, special agent in charge of the New Haven Division of the Federal Bureau of Investigation.

The indictment was returned on Jan. 12 and unsealed after Hughes was arrested Jan. 14. Following his arrest, Hughes appeared via videoconference before U.S. Magistrate Judge Robert M. Spector and entered a plea of not guilty to the charges. He is detained pending a detention hearing that is scheduled for Thursday, Jan. 21 at 1 p.m.

The indictment alleges that, in March 2015, Hughes founded Handcrafted Brands, LLC (HCB), for the purpose of raising money to purchase Salute American Vodka (Salute), an alcoholic beverage company. Hughes subsequently solicited and received funds from investors ostensibly for the purchase and subsequent development of Salute. Hughes represented to investors that their investments would be used to purchase and operate Salute, that investors would be compensated with equity shares of HCB or Salute, and that Hughes would not take a salary from HCB. In fact, Hughes misused investor funds on expenses unrelated to the purchase and development of Salute and diverted hundreds of thousands of dollars of investor funds for his personal use. In addition, some victim investors were not compensated with equity shares of HCB or Salute.

The indictment further alleges that Hughes solicited investments purportedly on behalf of another company, which is identified in court documents as “Company-1.” In fact, Hughes had no official relationship with Company-1 and could not raise capital on its behalf. Hughes also solicited investment money by falsely representing to investors that he owned a percentage share of Company-1, that he planned to acquire Company-1, and that Company-1 or its parent company planned to acquire his business. In fact, Hughes spent the investment money associated with Company-1 on personal expenses and on other expenses unrelated to Company-1.

It is further alleged that, in order to conceal his fraud, Hughes made “lulling” payments to investors. Lulling payments purportedly represent profits from an initial investment designed to inspire confidence that an investment is yielding results, and are made to encourage further investment. In fact, the source of the funds underlying the lulling payments made by Hughes included funds from other investors.

Finally, it is alleged that Hughes evaded the assessment of his tax obligations for the 2015 through 2018 tax years by substantially underreporting his income to the IRS.

The indictment charges hughes with seven counts of wire fraud, an offense that carries a maximum term of imprisonment of 20 years on each count; five counts of illegal monetary transactions, an offense that carries a maximum term of imprisonment of 10 years on each count; one count of money laundering, an offense that carries a maximum term of imprisonment of 20 years, and four counts of tax evasion, an offense that carries a maximum term of imprisonment of five years on each count.

Durham stressed that an indictment is not evidence of guilt. Charges are only allegations, and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This matter is being investigated by the Federal Bureau of Investigation and Internal Revenue Service–Criminal Investigation Division and prosecuted by Assistant U.S. Attorney John T. Pierpont, Jr.