A Bermudian reinsurance and wealth-management firm has been linked to a $1 billion fraud case in the US.

The Beechwood group, which includes Beechwood Bermuda International and Caymanian-based Beechwood Re, has been impacted after top executives at New York-based hedge fund Platinum Partners were arrested and charged with running a fraud that US federal prosecutors have described as “like a Ponzi scheme” as its largest investments slumped.

Now Beechwood is in talks to sell all or most of itself off after a backlash from some of its clients.

Beechwood, with offices in Bermuda, the Caymans and New York, has been working to sever its links with Platinum after the one time $1.35 billion hedge fund manager became the focus of probes by US federal authorities and put its funds in liquidation in July.

Beechwood, which had been a fast-growing reinsurer, was founded in 2013 with some indirect funding from Platinum and some crossover in personnel, is understood to be in talks with large insurance and private-equity firms, Reuters reported.

A spokesman for Beechwood said: “Beechwood has a successful business model that is attractive to investors.

“Beechwood’s unfortunate historical relationships with individuals from Platinum are causing substantial reputation issues for the firm separate from its performance.

“Beechwood’s confidential discussions with strategic investors continue to move forward.”

One of Beechwood’s major clients, Indiana insurers CNO Financial Group, pulled business from the firm after the scale of problems at Platinum became clear and sued three current and former Beechwood executives seeking damages.

Another client, Senior Health Insurance Company of Pennsylvania, is liquidating its Platinum-related holdings, invested for them by Beechwood.

Beechwood Bermuda opened up offices in Hamilton two years ago.

The company bought Bermuda-based insurance and investment firm Old Mutual in January this year. Old Mutual, which had more than $1 billion in assets, closed for new business in 2009.

The indictment in a New York court against Platinum chief Mark Nordlicht and six other current or former executives connected to the firm alleges that the firm took part in a pair of schemes aimed at defrauding investors.

It is alleged that Mr Nordlicht and four other defendants since 2012 defrauded investors by overvaluing illiquid assets held by its Platinum Partners Value Arbitrage funds, mostly troubled energy-related investments.

This caused “a severe liquidity crisis” at Platinum, which tried to fix the problem through high-interest loans between its funds before selectively paying some investors ahead of others.

Robert Capers, US Attorney in Brooklyn, New York, said: “The charges highlight the brazenness and the breadth of the defendants’ lies and deceit.”

Mr Capers said that the case involved one of the largest alleged investment frauds ever and that Platinum was exposed as having “no more value than a tarnished piece of cheap metal”.

Prosecutors claim that Mr Nordlicht, David Levy, Platinum’s co-chief investment officer and Jeffrey Shulse, former CEO of Texas energy firm Black Elk Energy Offshore Operations, majority owned by Platinum, plotted to defraud bondholders of the energy firm, now closed, out of $50 million.

The indictment also alleges that Platinum executives used the Beechwood group of reinsurance companies, partially controlled by Platinum’s principals, to rig a bond vote and pay the hedge fund managers ahead of creditors of Black Elk.

Platinum and Beechwood associate Murray Huberfeld was arrested on criminal corruption charges in June and Platinum’s New York headquarters were raided by Federal agents two weeks later in a separate fraud investigation, which ended in Mr Nordlicht and other Platinum executives being indicted.

It is alleged that Mr Huberfeld orchestrated a bribe to the head of the New York City prison guards’ union, Norman Seabrook, to secure a $20 million investment in Platinum.

Mr Huberfeld, who provided cash to help launch Platinum in 2003, with the firm later taking over separate hedge funds he managed, and Mr Seabrook deny the allegations.

The US Securities and Exchange Commission said it was seeking a court-appointed receiver for funds managed by Platinum Credit Management, the firm’s second-largest vehicle after Value Arbitrage.

Mr Nordlicht pleaded not guilty to charges including securities fraud and was granted bail on a $5 million bond, secured by $500,000 in cash.

Mr Levy and Uri Landesman, former president of the firm’s signature fund, Joseph SanFilippo, Value Arbitrage’s former chief financial officer, Joseph Mann, a former Platinum marketing executive and Daniel Small, a Platinum managing director, also pleaded not guilty.