Ponzi schemer Scott Rothstein knew fraud was collapsing - South Florida Page 1 of 3 20120626.0.4310002. story South Florida Ponzi schemer Scott Rothstein knew fraud was collapsing By Jon Burstein Sun Sentinel Sun Sentinel 11:36 PM EDT, June 26, 2012 The letter sent Scott Rothstein into a panic — he feared his colossal crimes were about to be exposed. It was February 2009, eight months before his $1.4 billion Ponzi scheme collapsed. A family of investors had sent him the letter demanding their $4.25 million back immediately, and Rothstein was certain they had uncovered his secret. "Holy s***, this is going to explode," Rothstein recalled thinking. "They figured out the Ponzi scheme. They know there's no money in the accounts. We are all going to jail." The imprisoned Rothstein offered fresh details into his final, paranoid-filled months of freedom in more transcripts released this week from his three weeks of closed-door testimony earlier this month. In addition to testifying how he kept the largest financial fraud in South Florida history alive, Rothstein explained how he hooked a group of investors by using real civil cases accusing billionaire money- manager Jeffrey Epstein of having sex with underage girls. advertisement Rothstein, 50, told his prospective investors they were buying confidential legal settlements in whistleblower and sexual harassment cases from plaintiffs who preferred quick lump-sum payments rather than waiting for all the money. All of the settlements were phony, with Rothstein and his office staff making up the backup paperwork. The fraud unraveled in October 2009 with Rothstein, a now-disbarred Fort Lauderdale attorney, briefly fleeing to Morocco, then returning to secretly cooperate with the FBI until his arrest a month later. He is currently serving a 50-year prison sentence, his whereabouts unknown because he's in a witness protection program behind bars. While he may be in hiding, he still has a lot to sa