NEW YORK -(Dow Jones)- The manager of Princeton Global Management Ltd., the investment fund at the center of a probe into Republic New York Corp.'s securities unit, has been charged with leading a scheme to cheat Japanese investors out of billions of dollars.Martin Armstrong, 49, who controls the Princeton, N.J., fund and its parent company, Princeton Economics International Ltd., allegedly sold $3 billion in promissory notes while concealing, in most cases, that he had suffered hundreds of millions of dollars in trading losses, according to a complaint unsealed Monday in federal court in Manhattan.
Armstrong used the proceeds from the note sales to set up trading funds for the investors at Republic New York Securities, the complaint said. When Armstrong lost $500 million in those accounts through trades over a 22-month period, he allegedly caused a Republic New York Securities officer to issue false confirmation letters fraudulently overstating their net asset value, according to the complaint.
Republic New York wasn't charged with any wrongdoing Monday, although the U.S. Attorney's office wouldn't elaborate on whether the bank is still under investigation.
Republic New York is in the process of being acquired by HSBC Holdings PLC (HBC) for $10.3 billion. HSBC, of the United Kingdom, said earlier this month that it plans to continue working toward closing the deal, although it could take "longer than originally anticipated to complete the regulatory process."
Federal prosecutors said the principal amount of the outstanding notes sold by Armstrong is between $700 million and $1 billion, although the value of the trading accounts at Republic Securities is only $46 million. What remains in the trading accounts was seized Sept. 2 under a federal court order, according to the U.S. Attorney's office.
Armstrong also controls several broker-dealers of securities, including Cresvale International Ltd., which sold the promissory notes primarily to Japanese institutional investors out of its Tokyo office, the complaint said.
The promissory notes, called the "Princeton" notes, were unsecured obligations issued by various special-purpose entities in the Turks and Caicos Islands and controlled by Armstrong, the complaint said.
In related moves, the Securities and Exchange Commission and the U.S. Commodities and Futures Trading Commission each filed civil actions against Armstrong, Princeton Economics and Princeton Global.
The SEC said it filed an emergency application asking the court, among other things, to freeze the assets of Armstrong and the two firms, and to require them to repatriate assets held off-shore.
Armstrong, of Maple Shade, N.J., was released on $5 million bond Monday afternoon by a U.S. district judge in Trenton, N.J. If convicted, he faces a maximum of 10 years in prison and a fine of $1 million, or twice the gross gain or loss resulting from the crime.
A representative from Durant & Durant, the Philadelphia law firm representing Armstrong, wasn't immediately available for comment.
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connect the fucking dots!
Mr. Armstrong, who was released on bond of $5 million, couldn't be reached to comment. His attorney, Marc Durant, said Monday night that his client "vigorously disputes the allegations and maintains his innocence."
Mr. Durant, of the Philadelphia law firm Durant & Durant, added that his client "very strongly believes he is being made a scapegoat for honest and noncriminal trading losses. He definitely intends to fight this."
Investment Manager Faces U.S. Charges Of Bilking Japanese - http://nyti.ms/awCrMB
Mr. Armstrong owes some $1 billion to investors, in both principal and promised gains, prosecutors say. But only $46 million in assets remains in the accounts, they said.
Mr. Armstrong, who was released on bond of $5 million, couldn't be reached to comment. His attorney, Marc Durant, said Monday night that his client "vigorously disputes the allegations and maintains his innocence."
Mr. Durant, of the Philadelphia law firm Durant & Durant, added that his
client "very strongly believes he is being made a scapegoat for honest and noncriminal trading losses. He definitely intends to fight this."
Investment Manager Faces U.S. Charges Of Bilking Japanese - http://nyti.ms/awCrMB
Mr. Armstrong owes some $1 billion to investors, in both principal and promised gains, prosecutors say. But only $46 million in assets remains in the accounts, they said.
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Marc Durant of Durant and Durant of Philadelphia, said they could no longer represent the trader because a federal judge had ordered them to surrender $1.2 million in retainers he paid them.
"The fees were ordered returned. That leaves counsel with no ability to properly prepare a defense for the defendant," Altman said yesterday in U.S. District Court in lower Manhattan.
His firm had received $841,000 from Armstrong. He said it had already invested roughly $200,000 in time and expenses on the case.
Durant, who must surrender $390,000, has invested more than $130,000 in time and expenses.
Armstrong has pleaded not guilty to civil and criminal charges that he ran a $1 billion bond swindle from offices at Carnegie Center in West Windsor, N.J., where his companies Princeton Global Management and Princeton Economics International are located.
Armstrong has said he is a scapegoat for offenses committed by others.
This week Owen ruled that $1.3 million in legal fees paid to Armstrong's lawyers out of corporate funds must also be turned over to Cohen.
Owen said the lawyers should have been wary of accepting the money because Armstrong was under investigation at the time he signed contracts to pay the lawyers. Much of the money was wired to Armstrong's lawyers in the hours before his arrest on Sept. 13.
"All the law firms were aware of the nature of the government's investigations into Armstrong's business dealings, and therefore, at the very least, in addition to knowing they were not being paid by the client, should have been aware of the possibility that they were being paid with corporate funds obtained by fraud," Owen wrote in his ruling.
Durant said they would drop the case. The Durant firm was hired by Altman, since the Princeton attorney does not have a license to practice in New York, whereas Durant does.
Marc Durant of Durant and Durant of Philadelphia, said they could no longer represent the trader because a federal judge had ordered them to surrender $1.2 million in retainers he paid them.
If the fed wants ya, they'll get ya. Period. http://post.ly/ktsu
#BlackSheep
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