Officers from the SFO and the City of London police executed search warrants late on Friday night at Mr Young's pounds 450,000 Buckinghamshire home, ending weeks of speculation about police involvement.
Yesterday neither Mr Young, who has not been arrested, nor his Dutch wife Harmanna were answering their telephone.
Mr Young disappeared from sight after gaining injunctions a week ago to prevent newspapers printing polaroid pictures of him with the two women at premises in the Paddington area of London. The orders also halted publication of any details of his visits to the girls, known officially only as "Sandra" and "Tracy", between June and December last year.
Leading merchant bank Deutsche Morgan Grenfell sacked 38-year-old Mr Young 10 days ago for alleged "gross misconduct" over dealings in speculative private companies.
Since joining four years ago, he had been the group's star manager, winning awards for his three top-performing European funds, later hit by losses.
DMG's parent, Germany's giant Deutsche Bank, was forced to step in to bolster confidence after pounds 300m of panic withdrawals from the pounds 1.4bn funds after the affair broke four weeks ago.
"There now apears to be sufficient evidence for a criminal investigation to begin," DMG spokesman James Murray said yesterday. "Investors will not lose because of these irregularities. Compensation will be paid when our enquiries are completed."
Investigators have uncovered a network of secret Luxembourg companies, through which Mr Young allegedly concealed large holdings in Scandinavian and US high-tech firms in breach of the bank's rules.
They also claim to have found evidence of improper personal payments to Mr Young. These allegedly helped him buy his new luxury home in affluent Amersham in April, which he shares with his wife and their two young children, aged two and three.
The move was a huge step-up from the family's previous pounds 135,000 suburban semi and investigators' suspicions were aroused by the lack of a mortgage on the new house.
Enquiries are also focusing on Mr Young's private Jersey bank account, which also held shares in the speculative stocks, including one mysterious Luxembourg company, Russ Oil & Technology. The firm was set up by Zurich- based solicitors Wyler & Wolf, payments from whom are also under scrutiny.
The law firm finally started co-operating with Ernst & Young, DMG's investigating accountants, last week but requests for information are being hampered by Swiss secrecy laws.
Russ Oil's ownership is still uncertain and enquiries have run up against a wall of other offshore accounts and so-called "bearer shares", sources say, which hide the identity of the ultimate beneficial owners.
DMG meanwhile has frozen Mr Young's assets and are holding his passport, while it completes its review.
His lawyer, Kathryn Garbett of City solicitors Peters & Peters would not comment last week on whether Mr Young had filed a statement of personal assets as required by the court order.
Ms Garbett - who was responsible for bankrupting Johnny Bryan, the Duchess of York's former financial adviser - acted swiftly to prevent publication of the photos after "Sandra" approached a tabloid newspaper with her story.
City watchdog Imro is also investigating. The regulator drew Mr Young to DMG's attention after his name figured in a US investigation into alleged irregular dealings in an oil company, Solv-Ex, by two convicted felons with links to organised crime.Reuse content