Luxembourg financial supervisors said yesterday they would shut down the Luxalpha hedge fund that invested heavily in a massive pyramid scheme allegedly operated by United States financier Bernard Madoff.

Luxalpha was promoted by Swiss bank UBS AG and was one of 16 Luxembourg-based funds that lost at least €1.7 billion (US$2.2 billion) in the fraud.

Madoff estimates that he lost some US$50 billion of clients' money.

The Commission for the Super-vision of the Financial Sector market regulator said it was withdrawing Luxalpha from the list of registered funds because it wasn't following local rules on how financial groups should be run.

It said it also would ask a court to wind up the fund and appoint officials to liquidate any remaining assets.

Suicide

Luxalpha board member Rene-Thierry Magon de la Villehuchet committed suicide in December when he lost US$1.4 billion (€1 billion) that he had invested with Madoff.

French officials have complained that looser regulation in neighbouring Luxembourg, a haven for banking secrecy, exposed French investors to losses they would not have racked up if they had invested in French-based funds.

- AP