A Connecticut hedge fund manager pleaded guilty on Monday to running a multiyear Ponzi scheme that may have defrauded investors out of hundreds of millions of dollars, U.S. prosecutors said.

Francisco Illarramendi, 42, pleaded guilty to five criminal counts including securities fraud, wire fraud and conspiracy to obstruct justice and defraud the U.S. Securities and Exchange Commission, U.S. Attorney David Fein in Connecticut said.

Two other men, Juan Carlos Guillen Zerpa and Juan Carlos Horna Napolitano, are being detained following their arrests Thursday on conspiracy and obstruction charges, he added.

Illarramendi entered his plea before U.S. District Judge Stefan Underhill in Bridgeport, Connecticut. The New Canaan resident could face up to 70 years in prison, while Guillen and Horna each face up to 25 years, Fein said.

We believe this case represents the largest white-collar prosecution ever brought by this office, Fein added.

John Gleason, a lawyer for Illarramendi, did not immediately return a request seeking a comment. Lawyers for the other defendants could not immediately be located.

Investigators said Illarramendi, majority owner of Michael Kenwood Group LLC, ran his Ponzi scheme from 2006 until last month, using money from new investors to repay old investors.

They said that, after learning of an SEC probe late last year, Illarramendi provided a false letter from an accountant in Venezuela that purported to verify $275 million of assets that did not actually exist.

Prosecutors said Illarramendi agreed to pay Guillen and Horna, both Venezuelan citizens, more than $3 million to fabricate the letter and evidence of the $275 million.

Investigators said Illarramendi's funds have included a Short Term Liquidity Fund said to once have $540 million of assets.

The SEC said this fund in fact held substantially less because many assets were used to fund redemptions to investors in another fund.

Separately, the SEC added new charges to its January civil complaint against Illarramendi. It said it won a court order freezing the defendant's assets later that month.

The criminal case is U.S. v. Illarramendi, U.S. District Court, District of Connecticut. The SEC case is SEC v. Illarramendi et al in the same court, No. 11-00078.

(Reporting by Jonathan Stempel; editing by Gerald E. McCormick and Andre Grenon)