Successful businessman Paul "Doug" Peters, 51, was arrested yesterday after a raid on a house in Kentucky, US, by heavily armed FBI agents and New South Wales police officers. Mr Peters, a father of three, was charged with aggravated break and enter with intent to commit a serious indictable offence, demanding property by force and intent to steal.

The indictment filed by US prosecutors reveals how Mr Peters was tracked down halfway across the world. It was made public as the defendant fronted an extradition application at the District Court in Louisville, Kentucky, about 12.30am AEST.

Far from clarifying why someone would tie a fake bomb to the neck of Ms Pulver, the arrest of Mr Peters has only served to deepen the mystery.

Mr Peters was described yesterday as passionate and volatile in his approach to business, but also upright and old-fashioned.

His stiff demeanour was seen as a legacy of his upbringing in colonial Hong Kong and schooling at Scots College in Sydney. His interests were drawn from the old school too - high-end cars, fine wine and horseflesh.

The evidence in court this morning went further in confirming just how bizarre the case was.

Prosecutors alleged Mr Peters surprised Ms Pulver as she studied in a bedroom at her family's Mosman mansion on August 3.

"At about 2.15pm Ms Pulver saw a man carrying a black aluminium baseball bat and wearing a striped, multi-coloured balaclava walk into her room," the indictment states.

The intruder allegedly told her to "sit down and no one needs to get hurt". He then allegedly forced a black box against her throat and looped a device similar to a bike chain, which was also attached to the box, around her neck. The man allegedly then locked the box into position around Madeleine's neck and placed a lanyard, which had a green USB stick and a plastic document sleeve attached, around her neck.

The man allegedly then said "Count to 200, I'll be back. If you move I can see you, I'll be right here", indicating the hallway outside the bedroom. He then left.

Extremely frightened, Madeleine sat there for a short time thinking that the man was robbing the house. After a few minutes she yelled out but there was no response. She phoned her mother on her mobile phone and took the documents from the plastic sleeve. She saw the word 'explosive' on one and assumed there was a bomb around her neck.

She phoned her father, who called the police, then read the document which said not to call police, but by then they had already been notified.

When police arrived Madeleine was crying and hysterical. The note contained the following: "Powerful new technology plastic explosives are located inside the small black combination case delivered to you. The case is booby trapped. It can ONLY be opened safely, if you follow the instructions and comply with its terms and conditions."

It said not to contact authorities, and provided a Gmail address. "You will be provided with detailed Remittance Instructions to transfer a Defined Sum once you acknowledge and confirm receipt of this message."

Police linked the account to Chicago airport and identified Paul Douglas Peters as having been there.

They examined computers that has accessed that account, and used CCTV to identify a vehicle that led them to Kentucky. Peters flew to the US five days after Madeleine's ordeal began. The account had reportedly been accessed on NSW's central coast, presumably at the Kincumber Library, where police seized a computer during an intense two-week investigation.

This morning the defendant's estranged wife, Debra Peters, sobbed in court as Magistrate Dan Whalin remanded her husband in custody.

Mr Peters appeared calm as he stood in the dock wearing a lavender shirt, tan shorts and sandals. He was placed in hand and leg cuffs. His lawyer, Scott Cox, said he was unfamiliar with extradition laws with Australia and reserved the right to apply for bail. Mr Peters is due in court on October 14.

For people who know Peters - a former senior executive of Allco Finance who divided his time between the New South Wales central coast and the US - the news has been greeted with astonishment.

Former colleagues said he valued his relationships with three teenage daughters, who live with his second wife in the small township of La Grange, outside Louisville, Kentucky, where he was arrested.

''He's a rational, intelligent high-achiever,'' former Allco colleague said yesterday.

It seems, too, that the father of the victim, Bill Pulver, is relieved but none the wiser. ''Bill doesn't know him,'' a police source said. ''He has no recollection of him at all.''

NSW Detective Superintendent Luke Moore confirmed in a US press conference that financial demands had been made by the intruder.

Those who know Mr Peters from his days at the now defunct Allco Finance Group - he was chief executive of the company's Malaysian joint venture - say he left for the US about a year ago in an apparently futile bid to reconcile with his second wife.

Neighbours in Kentucky painted a picture of the relationship with his wife, Debra, from whom he had been separated for at least four years.

A friend confirmed the pair sometimes lived together in the five-bedroom house with their daughters, but more often, she said, Mrs Peters would stay with family in New Jersey while he was in town with the three girls. ''They were definitely separated,'' she said.

The house had been put on the market six weeks ago, with an asking price of $US400,000.

After Allco collapsed in Australia, Mr Peters bought out its Malaysian arm, to create Douglas Corporation. But it too foundered and was dissolved some time after 2009.

Mr Peters was born in Hong Kong, the son of a Cathay Pacific pilot, and was sent to board at Scots in 1973 along with his two brothers.

''I am absolutely flabbergasted,'' said one of his classmates from the 1970s at Scots College. ''Paul was a fabulous part of our tight-knit crew,'' he said. A former girlfriend recalled him being part of a Scots gang known as the Muppets. ''They drove round in a white van and crashed people's parties and caused mayhem,'' she said.

''There was never anything in his psychology to suggest he might have done something like this,'' said another friend.

He was unlike his older brother Brent, nicknamed ''Brentos'' who was well known as the school bully.

Brent left school to become a bouncer in Kings Cross. At 25 he was charged with attempted murder of two police officers and at 28 he was arrested over a Kings Cross heroin distribution racket. Brent Peters was acquitted of both charges.

Another brother, Wayne, 54, is a successful investment banker who was managing director of Swiss Banking Corporation in Australia, before heading to Hong Kong where he ran fund manager Allard Capital Asia.

Mr Peters studied economics and law at Sydney University and, according to his LinkedIn entry returned to Hong Kong in 1988.

He moved into investment banking, becoming a specialist in tax-advantaged leveraged leasing in overseas jurisdictions.

With ANNE DAVIES and SAFFRON HOWDEN