LONDON (Reuters) - Britain's Serious Fraud Office (SFO) obtained search warrants unlawfully during its probe into property magnates Vincent and Robert Tchenguiz, the country's High Court ruled on Tuesday, dealing a further blow to the embattled fraud-busting agency.
Two of Britain's most senior judges said the SFO obtained the warrants "by misrepresentation and non-disclosure" to a judge, after the brothers launched a legal challenge into how the agency conducted its investigation.
A further court hearing to discuss details of the case, which is expected to leave the SFO facing a large bill for damages, will be held at around 1000 EDT. The SFO declined to comment ahead of that hearing.
The investigation stems from the brothers' complex dealings with Icelandic bank Kaupthing, which made large loans available to them shortly before it buckled in 2008 under a mountain of debt. British retail depositors lost millions in the collapse.
But the case, once one of the SFO's most high profile, has been deeply embarrassing for the agency, which has already been accused of "sheer incompetence" by a judge and in June dropped it case against Vincent Tchenguiz.
The Tchenguiz brothers, renowned for their champagne lifestyle and vast yachts, were briefly arrested in March 2011 and their properties raided.
They were not charged, protested their innocence and have said the publicity surrounding their arrest and raids inflicted lasting damage on their reputations and businesses.
(Reporting by Kirstin Ridley; Editing by Mark Potter)