It emerged yesterday that at least four unlisted Scandinavian investments of the funds are not in fact registered in Norway or Sweden, as Morgan had claimed. Instead they are believed to be based in Luxembourg.
A search at the Norwegian equivalent of Britain's Companies House showed no record of Horten Technology or Waferprod Holdings.
In Sweden, Catherineholm Holdings and Celltek Holdings similary produced no records. Investigators believe that Luxembourg, a secret haven for many front companies, was the real base of the four firms.
The further evidence of the massive deception behind Morgan Grenfell Asset Management's losses, now put at at least pounds 180m, came as Stewart Armer, a second fund manager at Morgan Grenfell, was suspended for breaching the company's rules on personal trading.
Mr Armer, in his early 30s and an Oxford University graduate, was a bit player in the emerging story of the tangle web of companies. He was trading on his own account, permitted by Morgan Grenfell only if he used internal brokers, which he had not done.
At the same time the Serious Fraud Office is believed to be preparing to launch a criminal investigation of the Morgan Grenfell funds. A spokesman confirmed that Imro, the fund management regulator, had been passing it information on the Morgan case.
Deutsche Morgan Grenfell, headed by Michael Dobson, is the investment banking firm at the centre of a push into the world securities industry by the German banking giant Deutsche Bank. The London-based operation made more than pounds 100m profit last year.
Deutsche Morgan Grenfell has already taken court action to freeze the assets of Mr Young who has not been seen since leaving his Buckinghamshire home on Wednesday.
Yesterday, investors withdrew about pounds 110m from the pounds 1.4bn funds, well short of the pounds 180m cash Deutsche has pumped in, but financial advisers believe withdrawals could soar as high as 40 per cent today. Many of the activities of Mr Young are interwoven with an Oslo-based broker called Fiba Nordic Securities, headed in London by Stephen Chance, which sold unlisted securities to the three suspended funds. It was investigated by the Securities and Futures Authority as long ago as April, when questions arose over a $70m (pounds 45m) private placement for an oil extraction company called Solv-Ex. The SFA, thought to have been tipped off by the US Federal Bureau of Investigation, uncovered evidence of relevance to sister regulator Imro, which in turn alerted Morgan Grenfell Asset Management.
Fiba said it welcomed any investigation by regulators. A spokesman added: "Peter Young (the suspended Morgan Grenfell manager) and Eric Langaker (a Fiba director) have a purely business relationship and anything you hear to the contrary is untrue."
The spokesman confirmed that Fiba is a UK-based company owned by "a couple of private Luxembourg investment companies". Fiba also confirmed it helped set up Russ Oil & Technology, the Luxembourg company named on Wednesday with Mr Young when the High Court froze their assets, restraining them from dealing in warrants or shares issued by Xavier Mines.
The scale of Mr Young's position-building became increasing apparent yesterday when it emerged Morgan Grenfell's holding in Norway's Sysdeco Group was 51 per cent, which under Oslo rules means the company should make a takeover bid. Sysdeco's share price has slumped at least 80 per cent since February.
Investigators were attempting to determine last night whether Mr Young had any personal stake in this company as well.
The Securities and Investments Board said it was reviewing its rules for unit trust valuations and the size of their investments in unquoted securities in the light of the Morgan Grenfell investigation.
The fund management group intends to release pricing on the units around midday today.
"The key issue concerned what value there was in these companies," said Graham Kane, head of the unit trust operation
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