The Austrian government has taken control of Bank Medici, a private bank that may have lost more than $3 billion from the alleged $50 billion fraud of US financier Bernard Madoff.

The Austrian government has appointed a supervisor to run the private bank – the first time a government has had to step in to oversee a victim of the “Ponzi scheme” allegedly committed by Mr Madoff.

Bank Medici, which put up to $3.6 billion into Mr Madoff’s asset management firm, said on Friday it would challenge the government’s decision to take control of its management, according to the Financial Times.

So far, Western governments have taken over banks due to the massive losses sustained as a result of the crisis in financial markets rather than as a result of frauds.

As part of the deal, the Austrian Financial Market Authority appointed Gerhard Altenberger as a government commissioner for Bank Medici.

In a statement, the bank said there was "no danger to the safety of assets entrusted to the bank".

"Both shareholders of the bank mutually acknowledge the appointment of the government commissioner. Bank Medici is willing to collaborate constructively with the government commissioner and to set all measures in order to ensure the most transparent and efficient reaction to the challenges the bank faces," the bank said. 

"It is important to highlight that the current status of Bank Medici is solid and that the bank has ample liquidity. Furthermore, there are no claims for damages or other liabilities brought forward against the bank. The bank does not anticipate any such claims in the future, since the bank's business activities and actions have always been duly compliant with the relevant legal and contractual provisions. There is, therefore, no substance for potential future claims for damages," it continued. 

Bank Medici is not a retail bank for private investors as its business is almost exclusively conducted with international institutional investors.

"In the coming weeks, the bank's supervisory board will discuss and pass a new business model that will be adapted to the current circumstances. Moreover, in the coming days the supervisory board will present experienced banking experts to strengthen the management of the bank," the bank added.

Bank Medici’s two chief executives, Peter Scheithauer and Werner Tripolt, resigned last Friday, though Mr Tripolt is expected to be reappointed to a new managing board.

Bank Medici had an estimated $3.6 billion under management when Mr Madoff was arrested in New York.

Most or all of the money is believed to be invested in Madoff funds, though no specific figures about the breakdown of Bank Medici’s asset allocation have yet been released.

Ms Kohn founded Medici as an investment boutique in 1994, using her contacts to Mr Madoff to attract business from eastern Europe, Italy and the Middle East. The bank has no relationship to the famous Florentine Medici family.