Austria has taken over the running of Medici, a private bank that lost billions of dollars in an alleged fraud by Wall Street financier Bernard Madoff.

The financial markets authority has appointed a new supervisor for the bank - Gerhard Altenberger - saying there was 'a risk that the financial institution will not respect its obligations to creditors, particularly in managing funds entrusted to it.'

Medici's two top executives, Peter Scheithauer and Werner Tripolt, resigned.

Medici last month said it had invested some €1.5 billion on behalf of clients in funds managed by Madoff, who is now being accused of a giant pyramid fraud scheme that lost $50 billion.

It was reported earlier that Medici's exposure was in fact higher, amounting to at least €2.6 billion.

But there was no official confirmation of the higher exposure, which would make Medici the financial institution worst affected by the scandal so far.

Spanish bank Santander has said its exposure was €2.33 billion.