The Serious Fraud Office has abandoned its long-running probe into property tycoon Vincent Tchenguiz, ending an error-strewn investigation that has dented the reputation of the UK fraud agency.

The decision to drop its investigation comes less than a month after David Green, the SFO’s newly installed director, announced he would personally oversee a review into the case against Mr Tchenguiz.

Mr Tchenguiz and his younger brother Robert have been at the centre of a 2½-year probe by the SFO into the 2008 collapse of Kaupthing, the Icelandic bank.

The brothers were arrested in high-profile dawn raids in March 2011. Over the past nine months, however, the SFO has been forced to concede factual errors with the evidence it used to obtain search warrants against them. The problems with the investigation were the subject of judicial review last month – the result of which is yet to be announced.

In a single-page letter sent to Vincent Tchenguiz on Monday afternoon, the agency said it no longer considered there were “reasonable grounds for suspicion against” him, adding that it had asked the City of London Police to end his bail.

Mr Tchenguiz, who has previously indicated that he will pursue the SFO for damages in excess of £100m, said he was relieved that “this shadow has now been lifted and I can get on with rebuilding my life and my business interests”.

“The damage, however, has still to be accounted for,” he added. “It is nearly 15 months since the SFO had me arrested – in a publicity-driven dawn raid. Since that time, I have maintained my innocence.

“I have consistently explained to the SFO that they had got it completely wrong – but, as their investigation collapsed around their ears, they stubbornly maintained that they regarded me as a suspect.”

In dropping the investigation, the SFO has drawn a veil over a very public investigation which attracted widespread criticism.

The problems with the case against Vincent Tchenguiz raised questions about the agency’s competence in pursuing complex economic crime cases.

The SFO is being monitored for the first time by the Crown Prosecution Inspectorate over the way it manages cases, and narrowly avoided being dismantled last year as part of a wider shake-up of the UK’s prosecution and investigation architecture.

In a speech last week, Mr Green, who took up the directorship of the SFO in April, told an audience in London: “I aim to recharge the SFO’s corporate self-respect and lead it to the top of its game as a major crime-fighting agency.”

The agency is continuing its investigation into Robert Tchenguiz.

Additional reporting by Caroline Binham

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