FEDS BUST N.J. TRADER IN $1B SCAM
Tuesday, September 14th 1999, 2:13AM
A self-proclaimed financial guru lost up to $ 1 billion of his rich clients’ money investing in risky trades, then lied on a grand scale to cover his tracks, prosecutors charged yesterday.
Martin Armstrong, founder of Princeton Economics International, hid his lousy investments from one client by using another client’s cash for cover, according to Manhattan U.S. Attorney Mary Jo White.
The Securities and Exchange Commission, which yesterday went to court to freeze Princeton’s assets, called the fraud the biggest to date.
At least one top executive of Republic National Bank, custodian for the investors’ money, has been implicated as abetting the scheme but has not been charged.
Armstrong surrendered to federal prosecutors in Trenton and was charged with securities fraud. Late yesterday, he was freed on $ 5 million bond.
The 49-year-old trader, who is not registered by the SEC, has been quoted widely in the financial press as an expert on gold and silver trading.
He once boasted of being a gold and silver trader for 30 years, neglecting to mention that he had been sanctioned by the Commodities Futures Trading Commission in 1989 for false advertising.
His firm maintains an elaborate Web site under the heading “Forecasting the World” that sells a $ 500-a-year magazine and Armstrong videotapes.
The group holds seminars featuring major speakers. The Web site includes a photo of Armstrong schmoozing with the April 1996 featured guest, former British Prime Minister Margaret Thatcher.
Armstrong lives in Maple Shade, N.J., and yesterday his mother and two sons co-signed the bond that allowed him to go free. Neither he nor his lawyers in Philadelphia returned calls seeking comment.
Two weeks ago, the FBI raided Princeton’s offices, seizing computers and 30 boxes of documents. Agents found evidence that Princeton has hid massive trading losses for more than two years, authorities said.
Since mid-1997, Princeton had sold $ 3 billion in promissory notes to Japanese investors. While they expected him to invest conservatively, the FBI alleges, Armstrong secretly invested the money in risky businesses.
He lost millions while telling investors their money was performing swimmingly. To back up his claim, he allegedly paid off impatient investors with other investors’ funds.
He also relied on letters from William Rogers, president of Republic National Bank’s futures division, which claimed the notes were worth much more than they really were, prosecutors Brian Coad and Richard Owens alleged in a criminal complaint.
Neither officials at Republic nor Rogers could be reached for comment yesterday.