Bank Shutters Madoff-Burned Fund Of Hedge Funds

May 14 2009 | 10:36am ET

The parent company of Bernard Madoff-burned fund of hedge funds shop Austin Capital Management is pulling the plug.

KeyCorp, Ohio’s second-biggest bank, has decided to “curtail” operations at Austin, based in the Texas capital, after investors lost some $186 million due to exposure to Madoff, who pleaded guilty in March to running a $65 billion Ponzi scheme. The move comes just weeks after Austin announced it would liquidate its three flagship funds and return what’s left of their money to investors.

Austin has had three class-action lawsuits and an arbitration proceeding filed against it in the first quarter, Cleveland-based KeyCorp said in its quarterly filing. While Austin did not invest directly with Bernard L. Madoff Investment Securities, it’s losses “stem from investments that Austin made in certain Madoff-advised ‘hedge funds,” KeyCorp said.

KeyCorp bought Austin in 2006.

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