More than a dozen Irish businessmen have been caught up in a multimillion dollar scam targeting investors hoping to make money from the so-called US war on terror.

The head of the scheme, New Jersey businessman Mario Figueroa, declared bankruptcy this month and is due to be sentenced on racketeering and money laundering charges in September.

He admitted travelling many times to London, Dublin and Belfast to entice investors, and based his business solely on UK and Irish custom.

The defence companies he invested in were supposed to be major suppliers of Tomahawk cruise missiles and armament parts to be used in Afghanistan and Iraq. In reality, some were little more than shell companies designed to lure investors.

One victim, Declan Ryan, a director of a recycling company called Atlas Oil Laboratories in Portlaoise, lost more than $150,000 (€109,000) after Figueroa's company, Clover Management International, diverted his money from an electronics company to a military defence contractor.

Mr Ryan said Scotland Yard had contacted him about the case but he held little hope of getting his money back. "I think I would only frustrate myself trying to get it back. They've probably drunk it by now."

Mr Ryan said he was initially impressed that Clover had invested his money in a legitimate company that made Palm Pilots, but later switched it to a US defence contractor.

According to the US attorney's office in New Jersey, Clover vastly exaggerated the contracts the defence companies had with the US government in the lead-up to the war on Iraq.

"Once they had the money, their story changed red, green and blue," Mr Ryan said.

Figueroa and his accomplices made more than $55 million from the scheme. He led a lavish lifestyle, buying a $2 million house, a Mercedes Benz sports car and a 62-foot yacht called Private Enterprise, all of which have now been seized by the New Jersey attorney general's office.

The FBI is investigating the possibility of Mafia involvement in the scheme.

One Munster businessman lost more than $100,000 after he received a call from co-conspirator Thomas Russo, of Hackensack, New Jersey, who has also pleaded guilty to fraud charges.

"They called me just after I sold an apartment. They told me that Ireland had done really well on the property market and now it was time to invest elsewhere. I can't believe I was that gullible," he said.

He met Figueroa in the Shelbourne Hotel in Dublin and found him to be very polished and convincing. "He talked about his love for the Catholic Church and his love for his family. He knew his stuff and he made you feel stupid for not investing," he said.

Like Mr Ryan, the businessman said Clover initially invested his money in reputable stock but later switched it to virtually worthless defence stock on the promise that the war would reap vast profits.

A third investor, Frank Sumner, originally from Athlone and now the owner of the Strabane Garden Centre, in Co Tyrone, said that he lost about £6,000 to the scheme.

"They were very good at what they did. They had a way of getting inside your head," he said.

Mr Sumner, who served in the Defence Forces for more than 20 years, said he accepted that he would most likely not get his money back.

He is one of 13 Northern Ireland investors so far identified, many of them directors of companies involved in property, engineering, electronics. One is connected to a Derry property company, another to a pub in Armagh.

The names of the investors only emerged this month after Figueroa declared bankruptcy and listed investors as his personal creditors. However, he withdrew his bankruptcy petition last Wednesday.

At least three UK investors lost more than $1 million each and have hired a New Jersey attorney to win their money back. Scotland Yard believes there may be other UK and Irish investors who have not come forward because of fear of tax implications.

One London investment company, which is listed as a Figueroa creditor at least five times because of various investment schemes, was fined in 2005 for failure to prevent money laundering, the first company to be fined under UK anti-money laundering legislation.