PORTLAND – A grocery stockroom clerk-turned-commodities trader has been charged in a $6 million pyramid scheme that promised 1,200 investors returns of up to 10 percent a week.

Edward W. Knipping, 55, of the Boothbay region was charged with fraud and trading commodities without a license after his arrest Wednesday in Bedford, Texas. If convicted, he faces up to 30 years in prison and millions of dollars in fines and restitution payments.

He allegedly lured people in 40 states, Canada and Australia with assurances they would make returns of 1 percent to 10 percent per week by investing in stock futures that tracked the Nasdaq and Dow Jones stock indexes, U.S. Attorney Paula Silsby said Thursday.

Instead, Silsby said, Knipping lost most of the money and lied about it to investors. Of the $6 million he raised, only $1.1 million remains; the government seized the money from Knipping’s bank account earlier this month.

“This is a very substantial case,” Silsby said. “It is the second-largest investment fraud case we’ve handled.”

Knipping’s attorney, Walter McKee of Augusta, said his client did not intentionally lose investors’ money and is not guilty of fraud or any kind of cover-up. He said Knipping has been cooperating with law enforcement officials, and was in Texas to visit family members.

“This investigation only started a month ago,” McKee said. “I’m quite shocked he was arrested as quickly as he was.”

Knipping and his businesses were charged with wire fraud by the U.S. attorney. He also faces three civil counts of fraud and of trading without a license by the U.S. Commodity Futures Trading Commission in Washington.

According to court documents, Knipping operated his business under the names Time Traders Investment Group and Time Traders Inc. He allegedly solicited investors from June 1999 until last month with telephone calls, faxes and e-mails promising them “private membership” by invitation only.

He encouraged investors to recruit others and the organization eventually consisted of different trading groups set up in pyramid fashion, prosecutors said.

Each week, Knipping faxed market summaries to investors showing the value of their investments and the previous week’s activity. The summaries, however, frequently reported profitable trading results even though Knipping was losing money, prosecutors said.

For example, Knipping claimed substantial profits from February to April, when in fact he actually lost $837,000, said Susan Bovee, an associate enforcement director for the Commodities Futures Trading Commission,

Overall, Knipping attracted 1,200 investors – including seven in Maine who lost between $225 to $4,000 each, Silsby said.

Investigators first were alerted to Knipping after the spouse of an employee at the Maine Bureau of Banking received a solicitation letter from Knipping, she said.

Knipping has no formal investment training. Investigators determined that his previous work experience was in sales and marketing, and that he most recently was employed as a stock room clerk at Shop ‘n Save.

“He watches CNBC to gather information to make trading decisions and occasionally will go [on the Internet] to obtain market information,” according to the federal complaint.

He made money on his investments in only five of 17 months from October 1999 through April this year, prosecutors said.

The largest investment fraud case in Maine was that of Catherine Duffy Petit, who was sentenced in 1999 to more than 15 years in prison for masterminding an investment scam in which 140 Mainers lost nearly $8 million.