UPDATE 1-Benedict Hentsch ends Fairfield merger due to Madoff

ZURICH Dec 15 (Reuters) - Bank Benedict Hentsch said on Monday it had ended its partnership with alternative investment specialist Fairfield Greenwich, which admitted investing $7.5 billion in funds set up by Bernard Madoff.

Madoff, a former Nasdaq chairman, was arrested last week for allegedly orchestrating a $50 billion financial fraud.

Geneva-based private bank Benedict Hentsch merged just three months ago with Fairfield, which said it had invested half of its assets in one of the funds set up by Madoff.

"The bank regains its complete independence," Benedict Hentsch said in a statement.

The bank confirmed its exposure to Madoff products was 56 million Swiss francs, or 5 percent of its assets under management. (Editing by Jon Loades-Carter)