High-profile New York lawyer Marc Dreier pleaded guilty on Monday to criminal charges of running a $400 million investment fraud involving fake promissory notes, and a judge released him into house arrest until sentencing.

The Harvard-educated Dreier, once head of 250-member law firm Dreier LLP on New York's exclusive Park Avenue, was arrested last December on charges of swindling hedge funds and investment funds in a four-year-long scheme that unraveled in the financial crisis.

Dreier, who turns 59 on Tuesday, said in a prepared statement in Manhattan federal court before U.S. District Judge Jed Rakoff that he was guilty of securities fraud, conspiracy, wire fraud and money laundering.

Each of the most serious counts carries a maximum prison term of 20 years, but the judge ruled at the end of a two-hour-long hearing that Dreier could remain under armed guard in his luxury New York apartment until his sentencing on July 13.

The judge said that although Dreier ranked with those who have committed some of the most egregious frauds in history and had disgraced the honorable profession of law, he could be released under the law because he was not a flight risk or a danger to the community.

I understand that everything I was doing was illegal, grey-haired Dreier, in a dark suit and seated in court, read from his statement covering each of the eight counts against him.

The indictment of Dreier in March indicated investors were owed about $400 million after the lawyer purported to sell promissory notes on behalf of a New York developer and a pension fund in Canada.

U.S. prosecutors are seeking about $700 million in forfeiture from Dreier, who had lived a lavish lifestyle owning several homes, boats and a valuable art collection.

During Monday's hearing Dreier looked disconsolate, staring down at his hands much of the time.

The losses in the fraud still pale next to those of financier Bernard Madoff, who pleaded guilty in March to the biggest investment fraud in Wall Street history -- as much as $65 billion. Madoff was jailed pending sentencing in June.

Dreier's lawyer Gerald Shargel and two receivers winding down the law firm and his personal assets told the court he had complied with all restrictions and cooperated with investigators. Dreier was arrested on a charge in Canada in early December, but granted bail there, before his arrest upon returning to the United States on December 7.

The case is US v Dreier 09-00085 U.S. District Court for the Southern District of New York (Manhattan)

(Reporting by Grant McCool; Editing by Andre Grenon, Gary Hill)

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