are continuing their probe of Republic New York Corp.'s role in an alleged scheme to defraud Japanese investors, a federal source said Tuesday.

The source said investigators are examining Republic's part in aiding Martin A. Armstrong, an investment manager who was arrested late Monday on federal securities fraud charges. Mr. Armstrong, 49, who controlled Princeton Global Management Ltd., is accused of using a Republic Securities account to try to hide losses of as much as $950 million, and of causing an officer at Republic to "issue false confirmation letters."

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