Hedge fund that invested with Madoff shutting

By Svea Herbst-Bayliss

BOSTON (Reuters) - Hedge-fund firm GMB Capital Management is shutting down a fund that lost millions on bad bets that included having putting money with accused swindler Bernard Madoff, according to sources familiar with the matter.

The Boston-based GMB Low Volatility Fund LP, which had $50 million (33.7 million pounds) in assets at its peak, began liquidating late last year, the sources said.

GMB Capital is run by Massachusetts Institute of Technology professor Gabriel Bitran and his son Marco.

Low Volatility Fund told investors the fund would rely partially on Bitran's complicated algorithms to deliver low volatility where prices almost never change. The fund also relied on externally managed funds.

The father and son team also funnelled a chunk of money to Madoff, a financier accused last month of running a $50 billion Ponzi scheme, the sources said.

GMB Capital, which manages other portfolios in addition to the Low Volatility Fund, did not return a call seeking comment.

Nearly four weeks after Madoff's arrest, GMB Capital is the latest player in a scandal that has vaporized millionaires' fortunes, forced a handful of charities to shut down, and been linked with at least one suicide.

It has also embarrassed some of the investment management industry's brightest stars, who trusted the silver-haired Madoff without receiving real details on how he actually made money.