Image caption It is alleged that Mr Farkas participated in a "massive" fraud

The former boss of the now bankrupt US lender Taylor, Bean & Whitaker (TBW) has been charged with 16 counts of fraud, worth more than $1.9bn (£1.3bn).

Lee Farkas, who was chief executive and then chairman of TBW, was accused of trying to misappropriate money from banks and federal institutions.

The indictment also accused Mr Farkas and other unnamed conspirators of trying to obtain money from the Troubled Asset Relief Program (Tarp).

TBW ceased operating in August 2009.

Mr Farkas is charged with conspiracy, bank fraud, wire fraud and securities fraud.

TBW once oversaw some $30bn-worth of residential loans but filed for bankruptcy last August.

Bank failures

According to the indictment, the scheme began in 2002 when TBW began to experience cashflow problems, and relates to the misappropriation of funds from two institutions.

"Farkas and his co-conspirators allegedly engaged in a scheme to misappropriate more than $400m from Colonial Bank's Mortgage Warehouse Lending Division in Orlando, Florida, and approximately $1.5bn from Ocala Funding, a mortgage lending facility controlled by TBW," the indictment said.

Today's indictment describes an unprecedented scheme by executives at two large financial institutions to steal more than $550m from the American taxpayer Neil Barofsky, Special inspector general for Tarp

"According to the government motion seeking Farkas's detention, the fraud scheme contributed to the failures of Colonial Bank and TBW."

It was also alleged that a "series of false press releases" were put out to suggest that TBW had invested in Colonial, which caused Colonial to misrepresent that it had satisfied a requirement to qualify for money from Tarp, the US's taxpayer-funded bail-out plan for banks.

"The indictment further alleges that Farkas and his co-conspirators committed wire and securities fraud in connection with their attempt to convince the United States government to provide Colonial Bank with approximately $553m in TARP funds."

However, no Tarp funds were ever obtained.

'Truly stunning'

Mr Farkas was arrested on Tuesday night as he left a gym he owns.

It is believed that the co-conspirators are made up of "some at TBW and some at Colonial".

The charges were announced by members of the Financial Fraud Enforcement Task Force.

Assistant attorney general Lanny A. Breuer, for the criminal division at the Department of Justice, said court documents allege that Mr Farkas and others participated in a "massive" fraud, that was "truly stunning in its scale and complexity".

Neil Barofsky, the special inspector general for Tarp, added: "Today's indictment describes an unprecedented scheme by executives at two large financial institutions to steal more than $550m from the American taxpayer. Due to the efforts of SIGTARP agents, our law enforcement partners, and the SEC, this scheme was stopped dead in its tracks [and] taxpayers were protected."

Officials estimate that Mr Farkas personally gained "at least $20m" from these activities but "it's ongoing".

Members of the task force also included officials from the Federal Bureau of Investigation (FBI) and the financial watchdog the Securities and Exchange Commission (SEC).