HBOS was the lender in a case involving London property entrepreneurs the Candy Brothers who were conned into buying the King’s Beeches estate in Berkshire, a report from the Financial Times reveals.
The brothers, who bought Chelsea Barracks last year for £1bn, bought the Berkshire property for £6.5m in 2004.
The estate was sold on the basis of flawed paperwork that suggested four pensioners owned the site, when in fact it was owned by billionaire Saudi sheikh Khalid Bin Mahfouz.
On discovering the fraud the Candy brothers sued and won a case against the Land Registry, which had allowed the deal to go through.
Four pensioners used forged signatures on Land Registry documents to transfer ownership to another company, which was unaware of the fraud.
The case resulted in a £8m compensation payout shared between the brothers and HBOS.
The four men involved – Michael Downer, aged 71; John Clifford Williams, aged 65; John Mervyn Jones aged 62; and Malcolm Brown, aged 69, were sent to prison for their involvement in the crime for between two and six years.