Convicted fraudster Bernard Madoff said his $65 billion Ponzi scheme started after a legitimate investment strategy went bad and he tried to cover it up, according to an interview with him in prison.

He told David Kotz, the Securities and Exchange Commission’s inspector general, in the transcript released tonight by prosecutors, that the “problem occurred when I made commitments for too much money and then I couldn’t put the strategy to work”.

“It was my mistake not to just be out a couple hundred million dollars and get out."

The disgraced financier, who is serving a 150 year sentence for his crimes, said official regulators appeared never to suspect that he was running a Ponzi scheme, even though they received a string of complaints about him and visited his offices many times.

He “worried every time” financial regulators turned up at his office that they would unmask his investment fraud and said his encounters with examiners from the SEC were “a nightmare for me”.

But he nonetheless expressed surprise that the agency’s investigators seemed to find it “inconceivable” that he was operating a massive fraud.

Despite years of examinations and investigations it appeared that "it never entered the SEC's mind that it was a Ponzi scheme," he said.

A transcript of the interview appeared a month after Mr Kotz published a report criticising the SEC for failing to catch Madoff years earlier. That report carried excerpts of the meeting which took place in June while Madoff was awaiting sentencing for his crimes.

The transcript was among 536 pieces of evidence made public by the SEC late on Friday. They include court documents, e-mail messages, letters, memos and telephone records encompassing some 160 other interviews during the extensive probe, including conversations with four former SEC chairmen, former top agency officials and current and former staff members involved in the various botched investigations examined in the original report.

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