The global investment scandal circling around New York financier Bernard Madoff is hitting a Chattanooga nonprofit that helps ex-convicts find work.

Chattanooga Endeavors Inc. was hoping to win a grant next year to help expand its reach into Nashville, but will have to work without the grant, said its chief executive, Tim Dempsey.

Endeavors was in discussions with New York-based JEHT Foundation for the $100,000 grant, but JEHT is closing in January after losing its funds in the Madoff case, he said.

Mr. Madoff is accused of running a $50 billion Ponzi scheme that wiped out many investors around the world. Mr. Madoff, a former chairman of the Nasdaq stock market, was arrested by federal agents on Dec. 11 and accused of fraud associated with running the alleged scheme.

“We will have to look around and find another source of money,” Mr. Dempsey said.

Endeavors will launch the program next year in Nashville, but it will be harder to do, Mr. Dempsey said. The nonprofit has a federal grant of about $540,000 administered through the Tennessee Department of Corrections to cover the overhead.

Endeavors plans to operate a staffing service in Nashville employing people just released from prison, and it asked for the JEHT grant to cover payroll for 100 workers, he said.

Endeavors needs to employ at least 75 people to be profitable, Mr. Dempsey said.

Endeavors had planned to operate the Nashville administrative office from its Chattanooga headquarters, said marketing director Brad Waye.

The JEHT Foundation specialized in helping rehabilitate offenders, and it’s hard for nonprofits to find funding for such projects, he said.

“Funds are drying up for all nonprofits,” Mr. Waye said. “It’s a big blow to us and other programs like us. We’re not a warm and fuzzy project.”