Amaranth Advisors LLC, the hedgefund company that imploded after wrong-way bets on natural gas, said losses swelled by $1.4 billion this week because it had to unload assets at a discount to avoid a shutdown.

The value of Amaranth’s funds plunged 65%, or more than $6 billion, this month as of September 19, founder Nicholas Maounis said in a letter to investors late yesterday. The Greenwich, Connecticut-based firm handed over its energy-trading portfolio to outside investors and sold unidentified holdings to stem further losses and “avoid termination of our credit facilities and the risk of a consequent forced liquidation by our creditors,” he said.

The firm, which had $9.5 billion of assets as recently as last month, has become the biggest hedge fund collapse since Long-Term Capital Management LP failed in 1998. Amaranth agreed yesterday to allow Chicagobased Citadel Investment Group LLC, the $12 billion hedge-fund group run by Kenneth Griffin, and JPMorgan Chase & Co., the No. 3 American bank, to take over its energy positions, said two people with knowledge of the decision.

“Amaranth’s other alternatives weren’t that great,” the energy markets director of the University of Houston’s Global Energy Management Institute, Craig Pirrong, said.”The number of folks that can take those relatively illiquid trading positions off their hands are pretty limited, and they were only willing to do it for a sizeable price concession.”

Separately, Citigroup Inc., the biggest American bank, was in talks yesterday about buying a stake in Amaranth, two people involved in those discussions said.