A man who allegedly ran a $300 million Ponzi scheme and deposited some of the proceeds in the Bank of Bermuda has been indicted on charges of defrauding more than 500 people in 17 US States.

The indictment charging Martin E. Gause, 44, with conspiracy, securities fraud and international money laundering, says he "transferred much of (the $300 million) to an offshore account at the Bank of Bermuda,'' although details were only released of two deposits, totalling $17 million.

"We have recently become aware of this situation, which we are investigating as a matter of urgency,'' said Barry Shailer, senior vice president, corporate administration, at the Bank of Bermuda.

"As you will appreciate, Bank of Bermuda always complies with local and international regulations.'' Mr. Gause had been promising high returns on investments in companies that make short-term, high-interest loans, US Federal officials said.

The Securities and Exchange Commission has also filed civil charges against Gause and others connected with the scheme, a spokesman for US Attorney, Mary Jo White, said.

Her office said Mr. Gause was arrested on October 15 in Fort Lauderdale, Florida.

He is accused of selling more than $300 million worth of debt securities to investors who were told that the money would be invested in an Atlanta-based company called "Cash 4 Titles'', and similar companies that provide high-interest loans to borrowers who pledge their car titles and future payroll checks as collateral.

The indictment said Mr. Gause transferred the money to a bank account in Orlando, Florida, held in the name of Sunset Financial, a company that was supposedly affiliated with Cash 4 Titles but which, it is alleged, Mr. Gause controlled with an unnamed co-conspirator.

"Contrary to representations to investors, almost none of the investor funds transferred to the Sunset Financial account were provided to Cash 4 Titles or to any other company,'' the indictment said.

Instead, the US Government alleges, Mr. Gause "used the money to pay off previous investors and transferred much of it to an offshore account at the Bank of Bermuda''.

These transfers reportedly included $9.5 million on or around February 12 this year and $7.5 million on or around March 15.

The indictment said Mr. Gause and other unnamed suspects began operating the scheme in 1997, promising investors that they would earn annual interest as high as 36 percent.

Prosecutors are seeking the forfeiture of more than $25 million that Gause earned off the scheme, along with titles to his homes in Fort Lauderdale and in Cumming, Georgia.

They also seek forfeiture of title and interest he held in GMD Aviation LLC, a commercial aviation company in Lawrenceville, Georgia.

A Ponzi scheme is a fraudulent plan in which deposits from investors new to the scheme are returned to earlier investors, to mask the fact that their investments had been misappropriated.

Ponzi schemes usually offer extraordinarily high rates of interest to lure victims.

Barry Shailer