Bernard Madoff could spend the rest of his life behind bars after he agreed to plead guilty last night to running a “massive Ponzi scheme”.

The New York financier, 70, appeared in court in a dark suit and bullet-proof vest to face 11 charges of fraud that cheated some of America’s most famous names out of billions of dollars. Asked by the judge whether Mr Madoff would be pleading guilty, Ira Sorkin, his lawyer, said: “I think that is a fair expectation.”

Mr Madoff, who has been under 24-hour house arrest in his Upper East Side penthouse on $10 million (£7 million) bail since his arrest on December 11, is expected formally to enter the guilty plea at a hearing tomorrow. At that hearing, victims of his $50 billion fraud may get their first chance to confront him.

Prosecutors said that the charges carried a maximum sentence of 150 years and vowed to show no mercy. “The charges reflect an extraordinary array of crimes committed by Bernard Madoff for over 20 years,” Lev Dassin, the federal prosecutor, said. “While the alleged crimes are not novel, the size and scope of Mr Madoff’s fraud are unprecedented. As a result, Mr Madoff faces 150 years in prison, mandatory restitution to the victims of his crimes, forfeiture of his ill-gotten gains and criminal fines.”

The prosecution said that Mr Madoff’s guilty plea would not offer protection to any possible accomplices, such as his wife or children. “The filing of these charges does not end the matter. Our investigation is continuing,” Mr Dassin said.

Mr Madoff started his first stock-trading firm in 1960 with $5,000 in savings from a job as a lifeguard on Long Island. He went on to become a titan of Wall Street and a Nasdaq chairman. He and his wife collected money from wealthy investors while they played golf in the Hamptons, at Old Oaks in Westchester County and the Boca Rio in Boca Raton. Many came from his social circle on New York’s Upper East Side and the winter playground of Palm Beach, Florida.

Working from the seventeenth floor of the pink “Lipstick Building” in New York, Mr Madoff offered clients annual returns of up to 46 per cent, but he was operating a Ponzi, or pyramid, scheme that repaid earlier investors with money deposited by later ones.

On the day of his arrest in December last year he allegedly told his sons: “It is all just one big lie.”

His high-profile victims included the actors John Malkovich and Kevin Bacon; the Hollywood titans Steven Spielberg and Jeffrey Katzenberg; and Elie Wiesel, the Holocaust survivor and Nobel Peace laureate, who lost $15.2 million in charitable funds and his life savings.

“I would like him to be in a solitary cell with a screen, and on that screen, for at least five years of his life, every day and every night there should be pictures of his victims, one after the other after the other, always saying, ‘Look, look what you have done to this poor lady, look what you have done to this child, look what you have done,’ ” Mr Wiesel said last month.

The charges said that the Ponzi scheme dated back to the early 1980s. “Madoff operated a massive Ponzi scheme in which client funds were misappropriated and converted to the use of Bernard L. Madoff Investment Securities (BLMIS), and others,” the criminal complaint said. “Contrary to his promises to those clients that he would use their funds to purchase securities on their behalf, and would invest client funds pursuant to the strategies he had marketed, Madoff used most of the investors’ funds to meet the periodic redemption requests of other investors.” The 25-page criminal complaint also described how Mr Madoff transferred $250 million through his London affiliate, Madoff Securities International, to “give the appearance that he was conducting securities transactions in Europe on behalf of the investors when, in fact, he was not”. Instead, the funds were sent back across the Atlantic to New York to help to pay for his market-making and proprietary trading business there.

Account statements and trade confirmations sent to clients showing healthy returns were fictitious. In November 30 last year, BLMIS had approximately 4,800 client accounts that it claimed held a total balance of approximately $64.8 billion. “In fact, BLMIS held only a small fraction of that balance on behalf of its clients,” prosecutors said. So far the authorities have located about $1 billion of the missing funds.

Judge Denny Chin said that he would not sentence Mr Madoff for several months after tomorrow’s hearing. He said that the hearing would also determine whether Mr Madoff would be taken into custody immediately or be allowed to remain under house arrest until sentencing.

The judge told prosecutors to limit the victims who will be allowed to speak in court to those who want to argue against the judge accepting the guilty plea, or those who oppose the judge’s decision whether to allow Mr Madoff to remain on bail. Judge Chin emphasised that anyone addressing the court would be limited in time.

Yesterday’s hearing was to address potential conflicts of interest between Mr Madoff and his lawyer, Mr Sorkin, whose family invested $90,000 with the financier.

Asked by the judge whether he was satisfied with his lawyer continuing to represent him, Mr Madoff answered simply: “Yes.”

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