Commodity Futures Trading Commission
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Release: 4952-04 (CFTC Docket Nos. 04-19; 04-20)
For Release: July 13, 2004


Two Former Officers of Republic New York Securities Corp. and Former Director of Princeton Global Management, Ltd., Ordered to Pay Over $14 Million in Restitution and Penalties

WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) today announced the issuance of two orders requiring over $10 million in restitution and assessing over $4 million in civil monetary penalties against William Rogers and Maria Toczylowski, the former President and Vice President, respectively, of the commodity futures division of Republic New York Securities, Corp. (Republic), and Harold Ludwig, former co-director, with Martin Armstrong, of Princeton Global Management, Ltd.

The Armstrong Ponzi Scheme

Today’s actions arose out of a Ponzi scheme allegedly operated by Martin Armstrong. In September 1999, the Commission charged Armstrong and two companies he controlled with commodity law violations. As part of the alleged fraudulent scheme, Armstrong marketed “Princeton Notes,” promising investors that their funds would be used only for safe investments. Armstrong allegedly used the proceeds to engage in risky commodity futures and options trading about which his investors knew nothing. As alleged, Armstrong pretended to be hugely successful, while in fact incurring trading losses in excess of $600 million. (See CFTC News Release 4312-99, September 14, 1999.)

Armstrong, who was indicted by a federal grand jury in 1999 for fraud in connection with the alleged scheme, has spent four and one-half years in jail on civil contempt charges for failing to comply with court orders to turn over certain assets obtained through the fraud.

CFTC Finds that Rogers & Toczylowski Assisted Armstrong to Defraud Investors

In the first of the CFTC’s orders, the CFTC finds that between 1995 and 1999, Rogers and Toczylowski, while employed by Republic, actively assisted Armstrong in perpetuating the Ponzi scheme. According to the order, while Armstrong suffered massive commodity futures and options trading losses, Rogers and Toczylowski, at Armstrong's instruction, deceived investors about the value of their accounts. The order states that as part of the deception, Rogers and Toczylwoski moved funds from one investor account to another and commingled assets to conceal Armstrong’s trading losses. According to the order, Rogers and Toczylowski issued false net asset value letters on Republic letterhead, misrepresenting the actual amounts in customers’ accounts.

CFTC Finds that Ludwig Also Defrauded Investors

In the second order issued today, the CFTC finds that from 1995 to 1999, Ludwig, as co-director of Princeton Global Management, Ltd., engaged in a fraudulent trade allocation scheme by opening his own personal trading account and, with the assistance of Rogers and Toczylowski, allocating winning trades to that account and losing trades to his customer accounts, all to the detriment of the investor victims. In today's first order, the CFTC finds that Rogers and Toczylowski aided and abetted Ludwig’s fraudulent allocation scheme.

Together, in its actions today, the CFTC ordered Rogers to pay $6 million in restitution and $2 million in monetary penalties, Ludwig to pay $4.9 million in restitution and $2 million in monetary penalties, and Toczylowski to pay $400,000 in restitution and $240,000 in monetary penalties. The CFTC also ordered all three respondents to cease and desist from further violations of the Commodity Exchange Act, revoked Ludwig’s and Toczylowski’s registrations, permanently prohibited them from trading on any registered entity and ordered them to cooperate with the CFTC.

In December 2001, the CFTC imposed a $5 million monetary penalty on Rogers's and Toczylowski's employer, Republic, and revoked Republic’s registration for its part in the Armstrong fraud. In addition, in a parallel criminal proceeding, Republic pleaded guilty to violating federal laws and agreed to pay $606 million in restitution to defrauded investors. Republic New York Corporation, then the parent of Republic New York Securities Corporation, merged with HSBC USA, Inc. on December 31, 1999, and the combined entity took the name HSBC USA, Inc. 

Commenting on today’s enforcement action, CFTC Enforcement Director Gregory G. Mocek stated: “The Commission continues its vital mission of protecting the public from being victimized by unscrupulous con artists. Our actions today and the actions undertaken by our partners in law enforcement continue to work towards paying full restitution to injured investors."

CFTC staff responsible for today’s action include: Lisa A. Rosenthal, Jacqueline H. Mesa, Lael Campbell, Lenel Hickson, Jr., Stephen J. Obie, Richard B. Wagner and Vincent A. McGonagle.

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Related Documents
Ludgwig Order
Rogers/Toczylowski Order