The UK’s Serious Fraud Office announced it had opened an investigation into suspected fraud at Sanjeev Gupta’s metals empire, causing talks over a rescue financing deal to collapse.

The SFO said on Friday that it was “investigating suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK”.

Hours later White Oak Global Advisors, which had agreed to provide an estimated A$430m (£236m) in emergency funding to GFG’s Australian steelworks and was in talks to provide a £200m loan to its UK steel operations, said it could not continue with the deals in light of the investigation.

“As with any regulated financial institution, we are not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering,” said the San Francisco-based lender.

The SFO probe and collapse of the White Oak talks bring Gupta’s GFG to its gravest crisis yet. The loose conglomerate of companies that includes Liberty Steel employs 35,000 people at metalworks stretching from Wales to Australia.

GFG was already reeling from the collapse of its main financial backer Greensill, a finance group where former prime minister David Cameron was an adviser.

The SFO had come under intense pressure to investigate Gupta’s steel conglomerate following reporting in the Financial Times that revealed suspicious invoices were provided by GFG to Greensill in exchange for cash. GFG has denied wrongdoing and Greensill was not obliged to check invoices.

According to people familiar with the investigation, the SFO has been talking to whistleblowers for around a year.

White Oak’s offers were still subject to final due diligence but the prospect of the fresh funding had raised hopes that Gupta would be able to save his business empire which has been reeling from the collapse of Greensill, its main lender.

It recently sought a £170m state bailout of Liberty, the UK’s third-largest producer of the alloy with 3,000 employees. The request was rejected by the UK government.

GFG said it would “co-operate fully” with the SFO investigation. It added that the group was “making progress in the refinancing of its operations which are benefiting from the operational improvements it has made and the very strong steel, aluminium and iron ore markets”.

In previous cases, the anti-graft agency has privately assessed matters covertly for several years before formally announcing them, such as in the case of British American Tobacco, which began in 2015 but was officially launched in 2017.

Overwhelming public interest or market requirements are key triggers for bringing a probe into the public domain.

In April the Financial Times revealed a series of companies named on invoices that GFG sent to Greensill in exchange for cash had denied ever doing business with Gupta’s group. Gupta later told the FT that one such company had been listed as a “prospective” customer, and financing was provided on that basis. 

Commodities trading houses have also launched investigations after web domains resembling their own were registered to a GFG employee’s email address.

The SFO takes on the GFG probe at a vulnerable time, having last month torpedoed a trial against two former Serco executives by failing to share certain evidence with the defence. Director Lisa Osofsky is under pressure to secure high-profile convictions, following a series of plea deals that have spared company top brass.

She had been called on by politicians including Tory MP Richard Fuller to initiate a probe, following a number of separate inquiries into the Gupta-Greensill network.

Greensill is being probed by the UK’s Financial Conduct Authority and a Treasury select committee.

The German financial regulator BaFin has filed a criminal complaint against the management of Greensill’s German bank for suspected balance sheet manipulation. The BaFin action followed a probe by an independent auditor, which raised concern over the level of the bank’s exposure to companies linked to Gupta.

Greensill had $5bn of exposure to GFG when the finance company collapsed in March.

Credit Suisse is seeking to wind up several Liberty Steel companies in the UK and Australia in order to claw back money for customers who invested in Greensill loans through the bank’s funds. 

Additional reporting by Robert Smith, Cynthia O’Murchu and Michael Pooler