Federal authorities are suing a Kauai man who they say defrauded investors of about $16 million that he was supposed to be investing in the stock market.

David E. Ruskjer, 58, was actually running a Ponzi scheme, using the money from new investors to pay off earlier investors, whom he promised monthly interest rates of 3 percent to 5 percent, according to the lawsuit filed yesterday in U.S. District Court by the Securities and Exchange Commission. He also offered a 1 percent commission for referrals from investors, the SEC said.

Ruskjer, who was not registered with the SEC to act as a broker, allegedly raised cash from at least 140 investors nationwide between September 2004 and December 2008.

Ruskjer made his pitch at coffee shops, hotel lounges and private residences, saying he would make money by selling options and having investors deposit checks directly into his bank account, the suit said. He paid investors $5.5 million in interest.

Ruskjer deposited about $7.9 million into a brokerage account, but had a negative 5.8 percent monthly return and lost $2.6 million, according to the suit.