It turns out that insurance giant AIG’s worst blunders may have taken place in London.

A small branch office there housed the notorious Financial Products Group, which may have put as much as $500 billion at risk.

That sum was put to work in credit default swaps, complicated derivatives used to insure U.S. subprime mortgages and other debt.

“AIG Financial Products was the core, the hottest point of the global financial crisis,” freelance investigative reporter Peter Koenig told ABC’s “Good Morning America” recently.

“It was the epicenter,” Koenig said. The group's traders “found a crack in the system that was unregulated,” he says.

That crack was credit default swaps.

Joseph Cassano, an American in charge of the group for eight years, refused through his lawyer to comment. But ABC News obtained a tape of Cassano from August 2007 in which he made some ill-considered comments to investors.

“It is hard for us with, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions,” Cassano bragged.

About a year after Cassano’s boast, AIG started losing billions. He was forced to leave the company last March.

Nevertheless, Cassano garnered $280 million in compensation before he departed.

As for AIG, many think it’s now a lost cause, despite the tens of billions U.S. taxpayers have poured into the company to keep it afloat.

“If you look at what has happened, I think it is too late,” retired insurance titan Eli Broad told Reuters.