Distributors have been told in a letter from the director of a British Virgin Islands-based fund run by the German hedge fund group K1 that the fund will be liquidated, according to media reports.

K1 Invest has appointed accountancy firm Grant Thornton to liquidate it.

The authorities believe K1 Invest is managed by K1 Group's founder Helmut Kiener, currently under arrest, whom they suspect of fraud and breach of trust. He denies the charges.

The letter is reported as saying the allegations and arrest of Mr Kiener "are of grave concern" and that the freezing of its bank account and the resulting inability to meet its obligations have led K1 Invest to determine that "voluntary liquidation is in the best interest of the company and the investors."