UPDATE 1-Colombia extradites financial conman to U.S.

* Authorities say he laundered cash in United States

* Failed pyramid schemes caused violent riots

* Thousands lost savings in Colombia's worst scandal (Adds details of U.S. indictment, Murcia travel itinerary)

By Hugh Bronstein

BOGOTA, Jan 5 (Reuters) - Colombia on Tuesday sent the country's best-known financial swindler, whose pyramid schemes sparked riots by victims, to the United States to face charges he laundered millions of dollars of cocaine proceeds.

David Murcia, mastermind of a financial scandal that cost thousands of Colombian families their savings, wore a bullet-proof vest and was heavily guarded as he boarded a plane to the United States.

"We are guaranteeing that he will answer to U.S. authorities," Luis Ramirez, head of Colombia's Judicial Police, told reporters.

Murcia, 28, was due to appear later on Tuesday in a U.S. district court in Florida before being transferred to New York for prosecution.

An indictment unsealed in a Manhattan federal court charges Murcia and six others with laundering millions of dollars of proceeds from cocaine trafficking in Mexico through Murcia's DMG finance company.

Colombian police seized Colombian currency worth more than $4 million in the investigation, and the gang is also accused of wiring nearly $2.2 million to a U.S. bank account, later confiscated by U.S. authorities, the charges said.

According to the indictment, the defendants sought to conceal the drug money by investing in real estate and in U.S. companies.

"Murcia ... allegedly played a shell game with dirty money, masking millions for narco-traffickers as legitimate transfers," Preet Bharara, U.S. Attorney for the Southern District of New York, said in a statement.

Other U.S. officials welcomed the extradition.

"Left to their own devices, narcotics traffickers would undermine entire economies through drug trafficking, money laundering, extortion and corruption," New York City Police Commissioner Raymond Kelly said.

RIOTS BY FURIOUS VICTIMS

Murcia was sentenced in 2009 by the Colombian courts to 30 years in jail for schemes in which investors were promised up to 100 percent interest.

Those who invested early in Murcia's DMG company, in 2006 and 2007, were handsomely repaid. They earned sky-high returns and some went so far as to mortgage their homes to invest in DMG, which also offered discount debit cards used in a chain of warehouse-like home appliance stores run by the company.

But those who put their money in later were left flat. Many rioted around the country, burning and looting DMG offices.

With investors' money, Murcia bought yachts, luxury cars and was known for renting out entire hotels to not be disturbed while on vacation. His exploits were made into a local television series.

Colombia's government was criticized for not shutting the pyramid scheme down before it collapsed in late 2008 just as the country's economy was entering recession.

Colombia is the world's biggest cocaine producer. The illegal trade reaches deep into the country's business and financial system. (Additional reporting by Pascal Fletcher in Miami and Ellen Wulfhorst in New York; Editing by Andrew Cawthorne and Philip Barbara)