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UPDATE 1-Prosecutors say Boston hedge fund's manager defrauded investors

(Adds comment from Massachusetts Secretary of State William Galvin)

BOSTON, Aug 2 (Reuters) - Federal prosecutors on Wednesday accused the manager of a Boston-based hedge fund of defrauding investors out of millions of dollars, nearly two months after state regulators charged him with engaging in a Ponzi-like scheme.

Raymond Montoya, who operated RMA Strategic Opportunity Fund LLC, misused millions of dollars to pay for luxury vehicles and his son's home mortgage and to repay earlier investors, according to a criminal complaint filed in Boston federal court.

Massachusetts Secretary of State William Galvin accused Montoya in June of engaging in an "egregious fraud" and brought an administrative complaint against him.

Galvin subsequently referred the case to federal authorities. Four days after Galvin brought charges, Montoya met with law enforcement and admitted to defrauding RMA investors, the criminal complaint said.

Montoya, 69, was released following a court hearing on a $100,000 bond after surrendering to face mail fraud and wire fraud charges. His lawyer, Christopher Bruno, said Montoya is cooperating with authorities and is in plea talks.

"His efforts are focused on preserving assets for ultimate return to investors," Bruno said in a statement.

During a court hearing, Assistant U.S. Attorney Neil Gallagher said Montoya had already agreed to freeze accounts he controlled holding $6 million to $8 million in assets and forfeit 10 vehicles including three Ferraris and two Porsches.

According to the complaint, Montoya had run RMA since 2009 and told investors it had about $4 billion in assets under management and used proprietary software that helped it predict stock price movements and was achieving positive results.

In fact, Montoya managed less than $100 million, invested only a portion of his victims' money and fabricated account statements for the fund, which was incurring losses by 2012, the complaint said.

During his June interview with authorities, Montoya said losses by 2015 and 2016 had become substantial but he nonetheless told investors they were earning modest returns, the complaint said.

It said Montoya also admitted that he used investor funds to make payments to earlier investors as well as to pay for personal expenses including travel, vehicles, tuition for his children and his son's mortgage.

In an interview, Galvin said it is not clear exactly how much investors lost. The complaint he filed said RMA had raised over $30 million from investors since 2014 but transferred less than $16 million to any brokerage accounts.

"Clearly it had gotten out of control," Galvin said. (Reporting by Nate Raymond in Boston; Editing by Peter Cooney and Tom Brown)