According to Bloomberg, Fairfield Sentry, which is based in the British Virgin Islands, filed a lawsuit in New York claiming that it paid the fees based on "inflated net asset value reports of its investments with Bernard L Madoff Investment Securities [BMIS]".
The plaintiff's complaint contests that Fairfield Greenwich "recklessly disregarded" its duties as a risk and investment advisor, and that its "actions and inactions" amounted to gross negligence.
Fairfield Greenwich founders Walter Noel and Jeffrey Tucker are named as defendants in the case, along with a number of other fund partners, Bloomberg noted.
In a statement, the firm rejected any allegation of wrongdoing, including the lawsuit field by Fairfield Sentry.
Mark Cunha, a lawyer for the hedge fund group, said the Madoff Ponzi scheme had been an "enormously sophisticated" deception that fooled scores of institutions, individual investors and regulators, including the Securities and Exchange Commission.
In a separate case, BMIS trustee Irving Picard is suing Fairfield Greenwich in an attempt to recover $3.54 billion withdrawn by the hedge fund before Mr Madoff's fraud was uncovered last December.