The Serious Fraud Office (SFO) has notified property investor Vincent Tchenguiz that he is no longer a suspect in relation to the 2008 collapse of Icelandic bank Kaupthing, bringing to an end a long-running investigation that has threatened the reputation of the UK fraud agency.

The news, which was delivered to Tchenguiz yesterday (18 June), comes after Tchenguiz (pictured) and his brother Robert became the centre of an investigation into the collapse of Kaupthing over two years ago.

The duo were arrested in March 2011 in a high-profile dawn raid; however, the fraud agency has since conceded that there were errors in the evidence it used to obtain search warrants against the brothers.

The SFO also confirmed it had made arrangements with the City of London Police for Vincent's bail to be cancelled. The businessman has indicated that he will press forward with a £100m claim against the SFO.

Lawyers acting for Vincent include Wilmer Cutler Pickering Hale and Dorr partner Stephen Pollard, Ben Emmerson QC of Matrix Chambers and Lord Goldsmith QC, the former Attorney General who is now head of European litigation at US law firm Debevoise & Plimpton.

White collar crime specialist BCL Burton Copeland is representing Vincent's brother Robert, with partners Ian Burton and Richard Sallybanks leading the firm's team.

Last year the brothers won the right to a judicial review of the circumstances surrounding their arrests, with recently-appointed director David Green QC putting himself in charge of an internal review. No judgment has been made by the director, and the SFO is continuing its investigation into Robert Tchenguiz.

An SFO spokesman commented: "We have notified Vincent Tchenguiz that there are no longer reasonable grounds to consider him a suspect in the ongoing investigation into the collapse of Kaupthing Bank. There are arrangement underway regarding the cancellation of his bail."

The case has raised questions about how the agency pursues complex economic crime cases, which have gained more prominence since the financial crisis.

Recent research by Pinsent Masons revealed that the SFO had carried out no raids in the year since the Tchenguiz arrests. From 2008 to 2010 the body conducted around 50 raids per year.