Princeton fund manager charged in securities fraud
NEW YORK, Sept 13 (Reuters) - The chairman of Princeton Economics International was charged on Monday with securities fraud in a scheme that may have robbed Japanese investors of $1 billion, U.S. prosecutors said.
Martin Armstrong was charged with duping investors in his Princeton Global Management and related funds -- including Tokyo subsidiary Cresvale International -- attracting $3 billion in investment, but now owing as much as $1 billion, according to a complaint unsealed by the U.S. Attorney's office.
Princeton covered up at least $500 million in trading losses in accounts held for some 300 Japanese investors, prosecutors said.
The complaint and accompanying litigation from the U.S. Securities and Exchange Commission charge that Armstrong sold ''Princeton Notes'' to Japanese investors to establish trading accounts, with the proceeds held in Republic New York Securities, a brokerage unit of Republic New York Corp. (NYSE:RNB - news).
Princeton Economics, a New Jersey economic forecasting firm that also owns Princeton Global and Cresvale, allegedly promised that each investor's account would be separately maintained and conservatively invested.
In fact, the officials charge, accounts were commingled using funds in one to pay off interest due in another. In addition, Armstrong ran up trading losses of more than $504 million and -- with the help of the former president of futures trading at Republic's brokerage unit -- issued false ''confirmation letters'' to clients overstating the balance in their accounts.
The U.S. Attorney's office and the SEC estimate that Armstrong owes investors a total of $1 billion against a remaining balance of $46 million in his funds.
He was scheduled to appear in U.S. District Court in Trenton, N.J., late Monday.
The scheme began to unravel after Japan's Financial Supervisory Agency requested that the Federal Reserve Bank and Republic Bank investigate the trading accounts.
Armstrong faces up to 10 years in jail and a fine of $1 million or twice the gain or loss resulting from the crime.
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