The top executives of a hedge fund have been charged in what federal prosecutors say was a $1 billion fraud.

Mark Nordlicht, the founder and chief investment officer of Platinum Partners, and six other people face charges of securities fraud, investment adviser fraud and conspiracy, Robert Capers, the U.S. attorney in Brooklyn, New York, said Monday.

The executives are accused of inflating the value of Platinum's companies to investors "despite clear evidence that the companies were unprofitable and in debt," an indictment said.

Nordlicht, Levy and other executives began relying almost exclusively on new investments and loans between funds to pay out older investors, the indictment said.

Platinum opened in 2003. By earlier this year, it was unable to pay most investors who wanted to pull their money out of certain funds, the indictment said.

It quoted an email from one unnamed investor who was frustrated and needed to take money out of Platinum to pay his or her own, separate investors.

"I am stuck with trying to explain to these people why they should remain in the fund while they do not get payments that are due to them," the investor wrote to a Platinum employee. "Nothing makes investors more jittery that not paying in a timely fashion. I have reached the end of my rope and I am out of excuses."

The co-defendants include David Levy, the co-chief investment officer, and Joseph Sanfilippo, who was chief financial officer.

Representatives for Platinum Partners and lawyers representing the company did not immediately return messages from CNNMoney.

Two of the company's funds were ordered liquidated earlier this year by a Cayman Islands court.