James Nicholson faces four felony charges in all, including securities fraud and investment adviser fraud, acting US attorney for the Southern District of New York Lev Dassin said.
The indictment alleges that Mr Nicholson began the fraud in approximately 2004. He is said to have told investors that Westgate had assets under management ranging in value from $600 million to $900 when in fact, the true value of its assets was materially less.
Furthermore, prosecutors contest that marketing brochures for Westgate funds showed "uniformly positive" returns for every month between October 1999 and August 2008, except September 2001. In reality, the indictment states that the funds' performance was materially lower.
Mr Nicholson is also accused of withdrawing $400,000 from various Westgate accounts in 50 transactions small enough to avoid reporting requirements.
In December 2008, prosecutors said a number of Westgate investors tried to redeem their investments and received checks totalling almost $5 million - but all of the checks bounced.
Last month, a judge froze the assets of Mr Nicholson and Westgate, and appointed a receiver for the company.