CITY regulators are to scrutinise the operations of Madoff Securities International, the London business controlled and chaired by Bernard Madoff, the man behind the $50 billion (£33 billion) alleged fraud that has sent shockwaves round the financial world.

Liquidators from Grant Thornton were appointed on Friday to conduct a “forensic investigation” into the London firm.

Madoff’s London business has been described as a personal trading operation for his family and was 88% owned by Madoff himself.

The firm’s £117m of net assets could now be seized by American prosecutors as part of their investigations into the alleged “Ponzi” fraud that has hit banks, hedge funds and individual investors across the globe. Grant Thornton said it would cooperate with the inquiries of the Financial Services Authority (FSA), the City regulator, and the US investigation.

Madoff was executive chairman of the London business. Its accounts reveal his involvement with the firm. He gave it £31m in subordinated loans in 2000, which were converted into equity in September 2007.

He still wanted to be paid the interest owed on the loans, however, which the company promised to pay out in 2008. Documents filed at Companies House reveal Madoff was due to receive the £1.3m sum in 2008, following a restructuring of the business.

Stephen Raven, the City veteran who ran the London operation, has attempted to distance himself from Madoff’s New York businesses in interviews.

However, the accounts suggest that the London business conducted a considerable volume of its trading through Bernard L Madoff Investment Securities, the broker-dealer that operated from the same building as Madoff’s disgraced asset-management business.

The London firm held more than £9m on account with its New York sister company on December 31, 2007. The London operation also received more than £1m in fees and interest payments from the New York firm.

Profits at Madoff’s London operation multiplied fivefold between 2006 and 2007, boosted by a huge increase in trading profits.

The highest-paid director in Madoff’s London business, thought to be Raven, received £301,000 – equivalent to 10% of the firm’s profits.

It has also emerged that Fairfield Greenwich, the main “feeder fund” that attracted money for Madoff, was regulated by the FSA. Fairfield Greenwich UK was the international bridgehead for the US investment firm, and the centre of all its operations in Europe and a fledgling business in China.

Andrés Piedrahita, the fundraiser who is said to have been the most succesful salesman for Fairfield, attracting money from wealthy Spanish, Swiss and Austrian families, is registered with the FSA.

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