The founder of Keydata Investment Services is planning to sue the City regulator for £370m, five years after the company collapsed.
Stewart Ford, who stepped back from the day-to-day running of the business in 2007, has written to the Financial Conduct Authority (FCA) to warn that he intends to begin legal action.
The regulator pulled the plug on the company after uncovering an unexpected £5m tax bill.
Mr Ford claims the FCA’s predecessor, the Financial Services Authority, had an “ulterior motive” in pursuing the company, whose collapse left thousands of retail investors nursing millions in losses.
Mr Ford, who is currently being investigated by the FCA, alleges that regulators targetted him and the company “to promote some benefit to the public at my expense”.
In an eight-page letter, he added: “The purpose was to demonstrate the effectiveness of the FSA as a ‘robust’ regulator in the wake of the financial crisis of 2008, and thus restore public confidence in the FSA.”
Mr Ford alleges that his investment in the business was worth £100m.
A spokesman for the FCA said: “The FCA’s disciplinary proceedings against Mr Ford continue and under these circumstances it is inappropriate to comment.”
The news comes after Britain’s Serious Fraud Office averted a £300m damages claim over its botched investigation into the Tchenguiz brothers.
The property barons Robert and Vincent Tchenguiz sued the agency over dawn raids by investigators on their homes and offices in March 2011.
David Green, who took over as head of the agency shortly after the raid, secured a £4.5m deal with the brothers after a lengthy legal battle.
The SFO offered its “deep regrets” for its errors.
“I am pleased that we have been able to resolve this final outstanding matter without the need for a costly trial,” said Mr Green, who dropped the investigation into the brothers in 2012.