A jailed New York hedge fund manager whose fraud was revealed in the wake of the Madoff scandal, admitted in court on Friday to fabricating client account statements and overstating asset values by hundreds of millions of dollars.

James Nicholson, former president of Westgate Capital Management LLC, was arrested on February 25 on charges of running a Ponzi scheme from 2004. U.S. prosecutors at first estimated losses of about $150 million but amended that to $133 million on Friday.

Nicholson pleaded guilty in Manhattan federal court to securities fraud, investment adviser fraud and wire fraud charges. He told the judge that he created fictitious account statements for his clients, who numbered more than 250 investors, many of them suburban residents of New York and New Jersey.

A Ponzi scheme is one in which early investors are paid with the money of new clients.

Nicholson, 43, said in court that most of the misrepresentations were made following the collapse in September 2008 of Lehman Brothers Holdings Inc, in which his funds invested. Prosecutors have said the scheme was partly exposed when investors made requests for redemptions from Westgate after the December 2008 disclosure of financier Bernard Madoff's multibillion dollar Ponzi scheme.

I stand before you as a man who is greatly ashamed for my actions, Nicholson told U.S. District Court Judge Richard Sullivan. Words cannot explain how sorry I am.

Nicholson, who ran the fraud out of the Pearl River, New York, hedge fund he founded, told the court that he lied to clients, saying his funds were worth as much as $600 million to $900 million when the true asset value was $50 million to $60 million at their peak.

Several of his former investors attended the court hearing but declined the judge's invitation to speak.

Nicholson, who is in jail because he could not meet bail, faces a possible maximum prison term of 45 years, the judge said. He scheduled a tentative sentencing date of April 30.

James Nicholson swindled his victims out of $133 million by making false assurances and claiming false profits, Manhattan's U.S. Attorney Preet Bharara said in a statement. Today's guilty plea is another important step in our ongoing effort to bring justice to victims of Ponzi schemes.

The case is USA v Nicholson, U.S. District Court for the Southern District of New York, No. 09-414.

(Reporting by Grant McCool; Editing by Andre Grenon and Richard Chang)