SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16279 / September 13, 1999
SECURITIES AND EXCHANGE COMMISSION v. PRINCETON ECONOMICS INTERNATIONAL, LTD., PRINCETON GLOBAL MANAGEMENT, LTD. AND MARTIN A. ARMSTRONG, 99 Civ. 9667 (RO)(S.D.N.Y.)
The Commission announced that it filed today a Complaint in the United States District Court for the Southern District of New York charging one individual and two corporations in connection with a massive scheme through which billions of dollars of promissory notes were fraudulently sold to Japanese corporate investors. The Commission simultaneously filed an emergency application asking the court, among other things, to temporarily and preliminarily enjoin the defendants from committing the violations alleged in the Complaint, appoint a temporary receiver for the corporate defendants, freeze the defendants’ assets, require the defendants to repatriate assets held off-shore, direct each of the defendants to provide an accounting, permit expedited discovery and prohibit the destruction of documents.
Named in the Complaint filed today are:
The Complaint alleges that, since at least 1996, Defendants fraudulently offered and sold at least $3 billion in high-yielding, fixed-term promissory notes issued by subsidiaries of Princeton Economics to Japanese corporations. The Complaint alleges that Defendants told investors that the proceeds of the note sales would be deposited into segregated accounts at Republic New York Securities Corp. (“Republic”), a registered broker-dealer headquartered in New York, and invested conservatively. These accounts were to secure repayment of the notes. The Complaint further alleges that, in fact, investor funds were commingled in a Princeton Global account at Republic and that Armstrong lost hundreds of millions of dollars through risky trading. The Complaint also alleges that Defendants misrepresented Princeton Economics’ prior investment results, and caused Republic to issue letters that concealed the trading losses in the Princeton Global account by materially inflating the value of the assets underlying the notes. The Complaint alleges that investor losses approach or exceed $1 billion.
As a result of the foregoing, the Commission alleges that Martin A. Armstrong, Princeton Economics International, Ltd. and Princeton Global Management, Ltd. committed securities fraud in violation of Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and Rule 10b-5, 17 C.F.R. § 240.10b-5. In addition to the interim relief sought in the application filed today, the Commission seeks a Final Judgment against Martin A. Armstrong, Princeton Economics International, Ltd. and Princeton Global Management, Ltd.: (i) enjoining them from future violations of the above-cited provisions; (ii) requiring the disgorgement of all of their ill-gotten gains, plus pre-judgment interest; and (iv) assessing civil penalties against them.
The litigation is pending as to all defendants.
A related civil action was filed today in the United States District Court for the Southern District of New York against Martin A. Armstrong, Princeton Economics International, Ltd. and Princeton Global Management, Ltd. by the Commodity Futures Trading Commission, alleging violations of the Commodity Exchange Act.