The Securities and Exchange Commission was sharply criticized by both U.S. lawmakers and the fraud investigator who blew the whistle on Bernard Madoff's alleged Ponzi scheme Wednesday, describing the regulator as scared to pursue cases against top securities firms and investors.

"You are both a captive regulator and a failed regulator," Harry Markopolos said of the SEC in highly anticipated testimony to a U.S. House subcommittee.

Markopolos detailed his nine-year effort to alert federal regulators about Madoff, who is accused of engineering one of the largest swindles in U.S. history. The SEC was "unable to understand" the complex financial instruments involved in the alleged fraud, Markopolos said, and regulators were not interested in pursuing investigations against influential firms and investors.

"The SEC was never capable of catching Mr. Madoff," Markopolos told a U.S. House Financial Services subcommittee.

Markopolos described his efforts in the terms of a Tom Clancy novel, sprinkling his testimony with talk of intelligence networks, the Russian mob, drug cartels and collecting information from "field operatives." He claimed he feared for his life as he sought to expose Madoff's actions, even making sure to remove his fingerprints from an envelope with Madoff information he handed to former New York Gov. Eliot Spitzer during an appearance in Boston.

"When you are zeroing out mobsters, you have a lot to fear," he said. "If [Madoff] would have known my name, and he had a team tracking it, I wouldn't have been long for this world."

Lawmakers agreed that Markopolos was right to take precautions. "When you deal with the kind of characters that you were trying to bring to the bar of justice, you have to be concerned, not only for yourself, but to family members that are near and dear to you." Rep. Al Green, D-Texas, said.

In order to ensure his safety, Markopolos said that in December 2005, he contacted a reporter at The Wall Street Journal, resulting in a number of phone calls and emails. Markopolos said he suspects that senior editors prevented a reporter from the newspaper's Washington bureau from flying to Boston to meet and discuss the Madoff issue.

"I believe that senior editors at that publication respected and feared Mr. Madoff and wouldn't let [the reporter] get on that plane no matter how much he wanted to get on that plane," Markopolos said in response to a question.

Dow Jones & Co., which is controlled by News Corp. (NWS), publishes the Wall Street Journal and Dow Jones Newswires. A Dow Jones & Co. spokeswoman declined to comment on Markopolos' accusations.

Markopolos also said that Madoff is not alone. He plans to turn in a "mini-Madoff" to the SEC's inspector general Thursday and urged lawmakers and regulators to pursue Madoff's alleged accomplices, including the feeder funds that brought in additional funds.

"My team was out there in the field talking to the Madoff feeder funds and identifying who they were," Markopolos said. "There are 12 more out there lying low in the weeds in Europe that you have not heard of yet."

Lawmakers on the panel lavished praise on Markopolos, while focusing their criticism on the SEC for missing warnings about Madoff for years.

"Unfortunately, our regulators failed to follow his road map and heed his warnings," Rep. Paul Kanjorski, D-Pa., said. "As a result, thousands of investors were hurt."

Rep. Scott Garrett, R-N.J., the subcommittee's ranking Republican, said the alleged Madoff fraud was not a result of a lack of regulation, but instead a lack of coordination and information sharing among regulatory bodies such the SEC and the Financial Industry Regulatory Authority, or Finra.

The entities, Garrett said, didn't pay enough attention to Madoff's broker-dealer operations.

"At least some of the things, had they been implemented earlier, at least in this case, it appears that the improprieties would have been discovered much earlier," Garrett said.

The Madoff case, along with similar alleged frauds that have been uncovered in the last two months, have focused criticism on the SEC as federal policy makers consider a wholesale overhaul of the U.S. regulatory system.

The group of SEC officials declined to speak specifically about the Madoff case, but said they were doing their best to protect investors.

"I think I speak for everyone when I say we hate fraud," said Linda Thomsen, director of the SEC's division of enforcement, said.

Lawmakers, however, weren't impressed.

"Your job is to prevent fraud, not to hate it," Kanjorski said, alternately describing the SEC's testimony as "oatmeal" and a "traveller's guide" that didn't address the issues exposed by the Madoff case.

-By Patrick Yoest, Dow Jones Newswires; 202-862-3554; patrick.yoest@dowjones.com