The owner of two Cambridge-based investment advisory firms was recently arrested in Vermont in connection with a scheme to defraud hedge fund investors.

Yasuna J. Murakami was charged with wire fraud in federal court in Boston.

Murakami was a managing member of MC2 Capital Management LLC and MC2 Canada Capital Management LLC – investment advisory firms through which Murakami established and managed three hedge funds: the MC2 Capital Partners Fund, MC2 Capital Value Fund and MC2 Capital Canadian Opportunities Fund.

Murakami allegedly fraudulently diverted millions of dollars of investor funds to business and personal accounts he controlled. He allegedly used the money to pay for lavish personal expenses such as a luxury sports car, international travel and payments to personal credit cards and high-end department stores. According to court documents, Murakami used new investor contributions to make Ponzi scheme-like payments to earlier investors who had made redemption requests and to place investments in his own name.

Murakami also allegedly provided investors with falsified account statements and tax documentation in an effort to lull them into believing their investments were safe.

In a parallel action, the Securities and Exchange Commission (SEC) announced securities fraud charges against Murakami and his hedge fund advisory firms. The SEC also filed charges against Murakami’s former business partner, Avi Chiat, in connection with the scheme. The Massachusetts Securities Division filed civil fraud charges against Murakami for the same conduct.

If convicted, he could face up to 20 years in prison, three years of supervised release, and a fine of $250,000.