Along with five others, Jon Asgeir Johannesson - Baugur's 37-year-old founder and boss - has been charged with 40 offences. Details have not been fully divulged, but it is known that the biggest in financial terms relate to a failed deal with Arcadia, the Top Shop fashion chain owned by the billionaire Philip Green, three years ago. Many of the claims emanate from complaints by Jonina Benediktsdottir, the former girlfriend of Mr Johannesson's father; she has little love left for the family.
Court proceedings will start on 17 August for Mr Johannesson and the others, which include his father and sister (the family owns 70 per cent of the business, which was taken private in 2003). At this point, the charges will be officially filed. Baugur is backing the six individuals, although - technically - it is a victim of the alleged crime.
But the market gossips don't care about that. The fact is, speculation has been swirling for some time around Baugur and the other Icelandic businesses and businessmen who are forging a strong presence on the global stage. " There have been questions over where its funds are coming from," says one UK retail analyst. "It's hard to see the obvious way, especially when you consider Iceland has about the same population as Coventry." For those not familiar with the West Midlands, that's around 300,000.
Just 16 years ago, Mr Johannesson had one shop, a discount store called Bonus, on the docks in Reykjavik. But since the 1998 merger with fellow Icelandic retailer Hagkaup, his Baugur group has been a conglomerate, now worth around £327m and one of the country's biggest companies. It is also the proprietor of British high-street names such as Hamleys, Goldsmiths and frozen-food chain Iceland, and, until the latest turn of events, was part of a consortium looking at Somerfield. That deal, likely to be worth around £1.1bn, would have been its biggest yet, but it became clear that the other members of the consortium - property tycoon Robert Tchenguiz, Barclays Capital and Apax Partners - no longer wanted Baugur, and it pulled out on Friday.
It is not the only Icelandic company making waves abroad. Icelandair raised its stake in budget airline easyJet to 11.5 per cent last week, and the country even boasts an entry in Forbes's list of the world's richest people, Bjorgolfur Thor Bjorgolfsson. The investment guru may be bringing up the rear, at number 488, but it is more than Coventry can boast.
So what is it about this country that has bred such a booming business community? Joan Feldbaum-Vidra, a New York-based analyst with Moody's, ranks Iceland as AAA, its best credit rating. "This reflects that it's a developed economy. It's wealthy, it doesn't have the debt. It has a flexible exchange rate, growth potential and a good pension situation."
The volcanic island has its home-grown industries: it is known for aluminium smelting, ample energy resources and fish. But the real reason the country is doing so well is its size. "It has a homogeneous population and there's a strong understanding when painful economic decisions need to be made. Things are just less complicated," says Ms Feldbaum-Vidra. That has helped lure considerable foreign investment in recent years.
But she warns that there are also downsides to being so small. "On the negative, there's a lot more volatility and even the smallest things can have a big impact." Which in turn means that the Baugur scandal could hit home hard. "Absolutely it could," says Ms Feldbaum-Vidra. "It's such a big company. Its products could be replicated but these situations, as we have seen in the US, affect investor confidence."
That said, the country's benchmark ICEX-15 index continues to go from strength to strength, currently trading at more than 4,000 compared to a low of 988 just four years ago.
Iceland adopted free market principles in the 1990s, allowing companies such as Baugur and a new generation of Icelanders to thrive and grow rich. But this displaced the old, family-controlled businesses that usually had strong political ties, and some politicians - including former prime minister David Oddsson - are believed to be concerned at the speed with which the new breed of companies have bought up assets.
It is no secret that the former head of the country and current head of Baugur do not get on, with Mr Oddsson once accusing Mr Johannesson of attempting to bribe him. Some believe this may, in part, be a motivation behind the charges. "There are some political issues," says one British businessman who has worked with Baugur in the past. "It's a bit like Russia. They have done [deals] in a marketplace that has sweet FA to do with Iceland. They have done them in a sophisticated market, so good luck to them. It's an open market and everyone has the chance to buy."
That market is, of course, the UK. Baugur - an Arcadia franchise-holder - steadily built up a 20 per cent stake in the business until, in 2002, it was set to buy Top Shop, Top Man and Miss Selfridge. However, a high-profile police raid at its head office scuppered the deal and the current charges have stemmed from the three-year probe that followed.
Mr Johannesson has said that losing the Arcadia deal cost the group £150m. But it was not all bad news: Baugur sold its stake for £70m and, its appetite for the UK high street whetted, the cash kickstarted its British shopping spree.
And despite the criminal charges and the Somerfield consortium's discomfort, some senior UK businessmen have been happy to defend Baugur. Kevin Stanford, the co-founder of Karen Millen, recently said he "totally" supported and trusted Mr Johannesson, while Sir Tom Hunter, part of the consortium that brought Big Food Group, owner of the Iceland chain, has also made it clear he trusts the Icelander.
Baugur's former Somerfield bidding partners were evidently less willing to back the Icelanders so far, but the company's strategy has generally been respected, despite the market gossip.
"When Baugur has invested in the UK, it has been quite happy to take a back seat in terms of strategy development," says Gavin Rothwell, a senior retail analyst at research group Verdict. "It has seen it as a money-making venture and had enough confidence in the management." And the attraction of the UK? "The price was right and it saw the value in assets."
Come August, and the true extent of the charges against Mr Johannesson and company will be revealed. In turn, they will have the chance to defend themselves openly. It will be a case watched eagerly, not just by the 300,000-odd residents of Iceland but by business communities around the world.
The implications could be far reaching. Yet whatever the outcome, and whatever people's private suspicions, most seem to agree: they might pause for thought, but the Viking raiders are unlikely to be stopped.
THE FIRM'S GONE TO ICELAND
In the UK, the retail group owns Hamleys, Mk One, Goldsmiths, Big Food Group, the Shoe Studio and Julian Graves, a health products chain. It also has a stake in Mosaic Fashions - the owner of Oasis, Karen Millen and Coast - which, last month, became the first foreign business to float in Iceland. Despite quitting the consortium looking to buy Somerfield, it retains a 5.5 per cent stake in the chain.
An investment company controlled by Bjorgolfur Thor Bjorgolfsson, Iceland's first dollar billionaire. He owns stakes in Swedish insurer Skandia and investment bank Carnegie, and had a 9.5 per cent holding in Singer & Friedlander. He is chairman of Actavis, the Icelandic pharmaceuticals company.
A food group that snapped up the salads and ready-meals business Geest earlier this year for £485m. It was founded by Agust and Lydur Gudmundsson, school friends of Jon Asgeir Johannesson.
The country's biggest airline has an 11.5 per cent stake in easyJet, worth around £100m.
Meaning White House, Hvita Husid is an Icelandic advertising agency and recently paid around £1m for a 10 per cent stake and seat on the board at UK rival Loewy. Baugur is a client.
Struck a deal to buy Singer & Friedlander, the British investment bank, in April for £547m. It acquired Danish bank FIH from Swedbank last year. It is Baugur's adviser and some-time backer.
The country's second-biggest bank by assets, it agreed to buy broker Teather & Greenwood for £42.8m earlier this year after failing to secure Numis.
Recently acquired two banks in Norway, allowing it to garner the bulk of its revenues from outside Iceland. Backed Baugur's bid for Hamleys.Reuse content