A revolutionary scheme to grow organic cod in Scottish fish farms, touted as the ethical answer to a global crisis in fish stocks, has been shut down after it lost £40m in three years.

The world's first attempt to farm organic cod, "No Catch" fish was sold as a breakthrough in sustainable fisheries. Its costly marketing campaign boasted it would "save the planet" and claimed celebrities such as Demi Moore had savoured its ethically-conscious produce.

"Not too high a price to pay for a clear conscience," its adverts said.

But the administrators Grant Thornton, brought in earlier this year to rescue the Shetland-based business from total collapse, admitted that organic cod farming had been a financial disaster and had no realistic chance of succeeding.

It has sold the firm's fish- farming business to two Norwegian-owned companies, who will instead begin producing organic salmon in Shetland's coastal waters. Its last supplies of cod – totalling about 3,400 tonnes - would now be sold off at knock-down prices, less than a tenth of its original cost in the shops.

The announcement confirmed mounting suspicions on Shetland – where accusations of bloated expense accounts and luxurious lifestyles at No Catch have been rife - that the much-hyped cod farming experiment was dead. Dozens of jobs have already been lost.

At Scalloway fish market last week, No Catch cod was being sold whole as ordinary fish for less than the wild-caught Atlantic cod it was expected to replace.

Once on sale as premium cod fillets in Tesco in the UK and Carrefour in France for as much as £20/kg (£9/lb), it reached as little as £1.70/kg in the fish market.

Daniel Smith, the administrator brought in by a bank that lost £15m in No Catch, said the firm's owners had had "very ambitious" plans but organic cod was just too expensive to produce. Its feed was expensive, it was forced to produce fewer fish to meet organic welfare standards, and it had also refused to let supermarkets sell its cod as "own label" fish.

As a result, it was double the price of wild cod from the sea. "The consumer is not yet prepared to pay such a large premium for wild cod," he said. "Cod production is still in its infancy, with a great deal still to be learnt about the life cycle of cod."

Karol Rzepkowski, one of No Catch's former directors, was unavailable for comment yesterday. But last month he insisted to the Guardian that farming organic cod was viable. "If we'd been given the chance to complete what we set out to do, to harvest the fish we'd put out to sea, that would've been the case. There's massive demand for farmed cod," he claimed.