The former chief financial officer and chief trader for hedge fund firm Boston Provident was arrested Tuesday for allegedly stealing more than $1 million from his employer.

Ezra Levy was charged with stealing the money both by diverting it from Boston Provident accounts and by purchasing stock for the hedge fund at inflated values from his own personal trading account, according to court documents. He was arrested at his home Tuesday morning and was due in court later that day, the U.S. Attorney for New York said.

The government alleged that after Boston Provident invested in a collateralized note in November 2008, Levy diverted the monthly installment payments of $66,000 due under the note starting in January 2009. Between January and October, Levy allegedly stole more than $726,000.

Prosecutors also alleged that, as the firm’s chief trader, Levy purchased Atlas Energy and Atlas Energy Resources stock from his own personal brokerage account at inflated values, which cost the hedge fund firm about $600,000.

Boston Provident said in a statement that the firm was outraged to learn of Levy's alleged theft. Not only did the firm terminate Levy immediately, but Boston Provident founder, Orin Kramer, reported him to prosecutors.

Boston Provident is cooperating fully with the authorities in the investigation and Kramer is providing restitution for the money allegedly stolen, the firm said.

Levy faces a maximum of 20 years in prison if he is convicted.

It has been a halcyon few weeks for federal prosecutors looking into alleged fraudulent activity in the hedge fund industry.

Last month, Galleon Group founder Raj Rajaratnam and five others were arrested and charged in an insider trading case. Last week, that case widened to 13 more charged, including several more in the hedge fund industry.

Out in San Francisco last week, another insider trading case was brought against Peter Yee, the former CFO of California-based hedge fund firm ValueAct and six others.