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Martin Armstrong and two firms to pay USD27m in anti-fraud action

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The US Commodity Futures Trading Commission has obtained more than USD27m in remaining restitution and permanent injunctions in consent orders that settle its fraud charges against Mart

The US Commodity Futures Trading Commission has obtained more than USD27m in remaining restitution and permanent injunctions in consent orders that settle its fraud charges against Martin Armstrong of New Jersey and his investment firms Princeton Global Management and Princeton Economics International.

In addition to the restitution awards, the consent orders bar Armstrong, PEI and PGM from trading, applying for registration, engaging in any activity requiring registration or acting as a principal of any registered entity or person.

The Honourable Kevin P. Castel of the US District Court for the Southern District of New York entered the consent orders of permanent injunction on 24 June 2008 and 31 July 2009.

Armstrong is currently serving a five-year sentence at the Federal Correctional Institution at Fort Dix, New Jersey. On 7 August 2006, Armstrong pled guilty in a related criminal action brought by the Office of the US Attorney for the Southern District of New York. Armstrong was sentenced pursuant to the 10 April  2007 order of the Honourable John F. Keenan of the US District Court for the Southern District of New York.

The consent orders arise from a CFTC complaint filed on 13 September 1999, against Armstrong and PGM and PEI, the corporations he directed as chairman. The complaint alleged that from approximately November 1997 to September 1999 Armstrong, PEI and PGM defrauded customers by operating and managing a commodity pool that concealed substantial trading losses incurred as the result of commodity futures trading. The complaint further charged Armstrong, PEI and PGM with issuing reports to customers that fraudulently represented the net asset value of their interests in the commodity pool. A related civil action was filed by the Securities and Exchange Commission.

In July 2004 the CFTC entered an order against Harold Ludwig, former co-director, with Martin Armstrong, of PGM, which required Ludwig to pay USD4.9m in restitution and a USD2m civil monetary penalty for his role in fraudulently allocating profitable trades to benefit himself rather than the Princeton customers. Also in July 2004, the CFTC entered an order against William Rogers and Maria Toczylowski, the former president and vice president, respectively, of the commodity futures division of Republic New York Securities. The order required them to pay USD6m and USD400,000 in restitution and USD2m and USD240,000 in civil monetary penalties, respectively, for their roles in executing net asset value letters that intentionally misrepresented the true values of the Princeton accounts and for assisting in fraudulently allocating trades to the detriment of Princeton customers.

In December 2001, the CFTC entered an order against Republic, a futures commission merchant through which the trading was conducted, that imposed a USD5m civil monetary penalty against Republic for its role in assisting Armstrong, PGM and PEI in hiding significant trading losses and in operating a Ponzi scheme. (

At the outset of this matter, the US District Court froze Armstrong’s, PGM’s and PEI’s assets and appointed a receiver to recover and distribute assets to defrauded investors. The receiver has thus far distributed more than USD50m in restitution as part of an interim distribution ordered by the court. An additional USD569m as part of a related proceeding filed by the USAO against Republic has also been distributed to the defrauded investors.

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