Two months later, the National Association of Insurance Commissioners held a hearing on stranger-originated annuities. Thomas R. Sullivan, a former Hartford Insurance executive and the state regulator from ING's home state of Connecticut, chaired the meeting.

"This is about embarrassment," says Caramadre. "Nobody ever complained about what I did until the insurance companies and the FBI came knocking."

In November 2011, after almost two years of work, a Rhode Island grand jury issued a 66-count indictment against Caramadre and Radhakrishnan.

Their criminal trial is scheduled to begin in November.

Today, several of the companies Caramadre targeted have stopped selling variable annuities. ING has been forced to get out of the business and write down billions in losses. Others have had to boost their reserves. Transamerica is trying to buy back some of the variable annuities it sold to policyholders. The French insurer Axa is offering its variable annuity holders money if they surrender their death benefit guarantees.

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