Federal prosecutors announced charges Wednesday connected to a Henry County biofuel refinery as part of a massive tax and securities fraud investigation, saying the operation cheated victims out of more than $100 million.

The fraud is alleged to be the biggest instance of tax and securities fraud in Indiana history.

The U.S. Securities and Exchange Commission launched an investigation last year into E-biofuels LLC in Middletown. E-biofuels filed for bankruptcy in April 2012. Its parent company, Evansville-based Imperial Petroleum Inc., received subpoenas from the SEC and a grand jury that May, according to a regulatory filing.

Imperial had to hand over an array of documents relating to E-biofuels’ accounting, purchases and sales of biodiesel, and tax credits and other incentives received from government agencies, the filing said.

“The purpose of the subpoena is to determine whether any federal laws have been violated,” the filing said.

Charging documents released Wednesday afternoon cited 88 counts against seven people and three corporations. Charges included allegations of conspiracy, wire fraud, false tax claims, false statements under the Clean Air Act, obstruction of justice, money laundering and securities fraud.

Prosecutors allege that E-biofuels actually wasn’t producing biofuel. Instead, it was purchasing fuel and selling it to customers as its own product for a profit.

E-biofuels also fraudulently collected on about $35 million in federal tax breaks reserved for biofuel producers, according to charging documents.

Brothers Chad and Craig Ducey launched E-biofuels in 2007. The plant was supposed to produce 10 million gallons of biodiesel per year. Lawsuits against the company indicate that it did not reach that mark.

Chad Ducey is a Fishers resident and Craig Ducey lives in Fortville, according to a bankruptcy filing. Both are named as defendants in the fraud case. They, along with co-defendants Chris Ducey and Brian Carmichael, were the primary operators of E-biofuels, according to charging documents.

The four men conspired with co-defendants Joseph Furando and Evelyn Katirina Pattison—two executives with a pair of related New Jersey-based companies—to purchase lower-grade fuel from third parties and then pretend that it was high-grade fuel from the E-biofuels plant.

The government alleges that the defendants sold more than 35 million gallons of the inferior fuel between July 2009 and May 2012. Unwitting customers paid an inflated price. All told, they were defrauded of more than $55 million.

Imperial bought E-biofuels in 2010 for $3.75 million in Imperial’s thinly traded stock and $15 million in debt. In a regulatory filing from April 30, 2012, Imperial said that 99.6 percent of its revenue stemmed from E-biofuels.

The government alleges that Jeffrey Wilson, the president and CEO of Imperial, knew that E-biofuels was purchasing biodiesel from third parties instead of making its own. He hid this fact from investors, sharholders and outside auditors. He also made false statements in Imperial's annual and quarterly reports filed with the SEC.

Imperial’s accounting firm resigned in August 2012, citing concerns its auditors could not rely on the company’s financial reporting for E-biofuels, according to an SEC filing. The filing did not specify what the problems were.

Carmichael reportedly has offered to plead guilty to a charge of conspiracy to defraud the United States. If convicted, he faces up to five years in federal prison.

The six other defendants face up to 20 years in federal prisoon on some counts, as well as significant fines. The three companies indicted Wednesday also face significant fines and other regulatory action.