Hsu appeared in court with his lawyer on Wednesday.
NEW YORK (CNN) - Federal prosecutors have charged Democratic fund-raiser Norman Hsu with breaking campaign finance laws and cheating investors out of millions of dollars in a $60 million Ponzi scheme.
The criminal complaint was announced Thursday at a press conference in Manhattan.
Hsu has raised money for several Democratic candidates, but most substantially for Sen. Hillary Clinton's, D-New York, presidential bid. Clinton's campaign has said it will return the $850,000 Hsu raised to the individual contributors.
Hsu is charged with one count of violating the Federal Election Campaign Act after using investors in his companies as straw donors, making various political contributions greater than $25,000, which Hsu then paid back to the straw donors. Other charges include one count each of wire fraud and mail fraud.
"In committing acts of campaign finance fraud" said U.S. Attorney Michael Garcia, "Hsu corrupted a system in which transparency is paramount in order to purchase a place on the celebrity campaign circuit."
Hsu contributed to political campaigns to raise his profile and draw more investors to his Ponzi scheme, prosecutors allege. "It doesn't appear the Ponzi scheme was devised in order to generate money for the political contributions," Garcia said.
Hsu persuaded his investors to contribute tens of thousands of dollars to various campaigns in order to build his public profile and lure more investors to his scheme, prosecutors say. Investors were made to fear that if they failed to contribute they would jeopardize their relationship with the company and risk losing their money.
However, the companies, Components Ltd. and Next Components Ltd., never conducted any legitimate business and were nothing more than an instrument to conduct the Ponzi scheme, prosecutors say. Hsu, whose phony companies guaranteed high return rates on short term investments, was actually paying older investors with money coming in from new investors, the allege. When the scheme fell apart investors were left holding millions of dollars worth of bad checks.
Hsu is being held in Denver on charges of fleeing San Mateo, Calif., to avoid prosecution. When he was arrested, authorities seized a laptop, a blackberry, and a suitcase filled with thousands of dollars. Also seized were checks from Hsu's victims as well as bank receipts for millions of dollars in transactions made by Hsu and a lists of specific campaign contributions made by investors on Hsu's behalf.
He would face 45 years in prison, as well substantial fines, if convicted on all charges.
- CNN's David Miller