A top fundraiser to presidential hopeful Hillary Clinton and other Democratic lawmakers was on Thursday charged with defrauding investors of more than $60m (€43m, £30m) and violating campaign finance rules.

The US attorney in Manhattan said Norman Hsu perpetrated a “massive” Ponzi scheme in which he convinced his victims to invest in companies but failed to invest the money in the manner he had promised.

Mr Hsu was also accused of making his investors believe their relationship with him – and their investments – would suffer if they failed to make political contributions to candidates he supported.

The charges are an embarrassing development for Mrs Clinton, who said she would return $850,000 in donations after Mr Hsu was exposed last month as a fugitive in an unrelated case.

Mrs Clinton on Thursday said it was “unfortunate none of us caught the problems that were there”.

“This happened to a lot of campaigns, a lot of investors who made investments that unfortunately don’t look like they were treated appropriately. The system of justice will work its course, and I think that is appropriate,” she told CNN.

Mr Hsu is in custody in Colorado, where he was arrested this month after falling ill aboard a train following a failure to make a court appearance on a separate legal matter.

While searching Mr Hsu’s possessions FBI agents discovered $7,000 in cash, hundreds of thousands of dollars in cheques from investors and bank receipts for millions of dollars of transactions, as well as ledgers reflecting the amounts of campaign contributions others made on Mr Hsu’s behalf to political candidates.

The businessman came under scrutiny after an investigation by the Wall Street Journal discovered a pattern of political contributions to Mrs Clinton and other Democrats.

According to an FBI special agent, Mr Hsu has confessed to making “phony” deals and that he “implied threats to his investors to pressure them to contribute to political candidates”.

“This case is about self-promotion and greed,” said Michael Garcia, the US attorney for the Southern District of New York. “Hsu perpetrated a massive Ponzi scheme to support his lavish lifestyle.”

Investigators had been in contact with Mrs Clinton, who was co-operating in the case, he added.

Mr Hsu’s attorneys could not immediately be reached for comment.