The revelations are contained in an affidavit sworn by Sion Richards of Jones Day, the law firm appointed to advise on Langbar’s litigation against its founders. It was submitted to the High Court in February but released only last week.

Richards details a catalogue of errors and oversights that led to the events in which the company, which purported to have £300m in cash as its main asset — managed to float on AIM without having any cash at all. The lack of cash went undetected for two years.

According to Richards, directors were on several occasions warned that the company’s actions were irregular and that there was no real sign of the cash deposits.

Lawrence Graham, the law firm that acted for the company from before its flotation in 2003, apparently missed several key warnings, the affidavit claims.

It is alleged that company founders Mariusz Rybak and Jean-Pierre Regli told Michael Storar, a partner at Lawrence Graham, that the “principal” subscriber to the float was SCS, a Swiss bank, which had pledged €207m. But Storar failed to raise the alarm when he was told by SCS that “they had not heard of this proposal, did not have any money for the transaction and did not have any arrangements with any clients for this purpose”.

Similarly, Richards records that although Langbar’s admission document to AIM stated that all the shares allotted to the founding directors had been paid for, nobody blew the whistle when “it became apparent shortly after flotation that the subscription monies had not in fact been received by the company”.

At the time, the company’s counsel in Bermuda sent an e-mail to Lawrence Graham warning: “We are incredulous that five payments of share subscriptions should bounce at the same time ... there may be an improper flavour about this...”

Richards reveals that considerable doubt was almost immediately cast over the existence of the company’s cash reserves, which directors said were held in a “certificate of deposit” at the Banco do Brasil.

An investigation into irregular signatures on the certificate led to an investigation into its authenticity being carried out by a specialist, Proximal Consulting, two months after the flotation.

Its report, dated December 30, 2003, stated: “Our own analysis of the international certificate of deposit which has been confirmed by Banco do Brasil is that this document is not genuine and is therefore worthless

... the term ‘International Certificate of Deposit’ (is) not a genuine one. It was our understanding that this term was in fact one used by criminals involved in prime bank fraud.”

The Richards affidavit was used to secure freezing orders on the assets of Rybak, Regli and other directors. Langbar’s new management says that it has so far identified assets worth an estimated €50m belonging to Rybak and his wife.

Rybak has filed a defence stating that the company has no claim against him. He also disputes the contents of Richards’ affidavit and claims that in reality events were very different. Lawrence Graham refused to comment. Regli could not be reached.

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