Market regulators in Luxembourg are to shut down a hedge fund that was recently hit by losses from the alleged $50 billion Madoff fraud because it has failed to follow local regulations governing the operation of financial groups, according to reports.

In a statement, the CSSF said it will apply for a court order to wind up the Luxalpha fund and appoint liquidators to take care of any remaining assets.

Luxalpha, which was promoted by Switzerland’s largest bank UBS, was among 16 Luxembourg-based investment vehicles that racked up losses of at least €1.7 billion ($2.2 billion) from the Madoff affair.

In December, Rene-Thierry Magon de la Villehuchet, a board member at the fund and co-founder of Access International Advisers, was found dead at his desk after apparently committing suicide in the wake of the losses.

Last month, CityAM reported that the investors’ group Deminor was suing UBS for recommending investments with Mr Madoff and neglecting the victims of his alleged fraud.

While UBS claims it did not directly recommend Mr Madoff’s firm, it did establish and promote Luxalpha, which recommended the Wall Street broker.