The Serious Fraud Office has agreed to pay property tycoon Robert Tchenguiz £1.5 million in damages in one of the most embarrassing episodes to hit the agency following a botched investigation.
The latest out-of-court settlement comes just a week after the SFO agreed to pay £3 million in damages and legal expenses to his brother, Vincent Tchenguiz, bringing total cost to the taxpayer to at least £7.5 million.
The Iranian-born mogul was arrested along with his brother in March 2011 as part of highly publicised criminal investigation into the collapse of the Icelandic bank Kaupthing.
The High Court later accused the agency of "sheer incompetence" over the handling of the investigation after it ruled that the arrest warrants against the Tchenguiz brothers were obtained unlawfully.
The pair argued that the arrest had caused them serious distress and reputational damage. At the time, the SFO admitted "that serious mistakes were made in connection with the application for search warrants in this case".
Today, David Green, SFO director, said: "As I said when Mr Vincent Tchenguiz accepted our offer last week, the SFO deeply regrets the errors for which we were criticised by the High Court in July 2012.
"On behalf of the SFO, I also apologise to Robert Tchenguiz for what happened to him. I reiterate that the SFO has changed a great deal since March 2011."
Robert and Vincent Tchenguiz denied any wrongdoing.