With almost £2m of rental properties in their portfolio, Geoff and Jane Morris were looking forward to a comfortable retirement.

It was the beginning of the golden age of the buy-to-let property boom and, like more than 1m other British investors, the couple thought they could build a nest egg on the profits of their investments in tenanted properties.

In 2004, however, they had the misfortune to come across Morris Properties in Leeds. The encounter would cost them their happy family life and their friends and leave them £500,000 in debt.

The couple had been scouting for property in Leeds when they were shown a number of properties by a West Yorkshire buy-to-let firm called Morris Properties, run by a millionaire developer named Simon Morris (no relation). They were so impressed by its apparent professionalism that not only did they engage to buy seven properties over the next few months but Geoff Morris, 62, agreed to become an agent for the company. On top of his investments, he was an agent on the sale of 15 properties and was looking at a paper profit of £50,000 in commission.

The scheme looked so attractive he gave up his job as a salesman for a software firm to concentrate on the venture. He even persuaded his two children and four family friends to invest in it.

However, the promises of healthy rental income were never fulfilled; in fact, no tenants ever materialised. He was forced to start selling the properties at vastly lower prices to meet his mortgage payments. His life disintegrated under a burden of debt.

“Our life became a nightmare,” said Morris. “I was so embarrassed about having drawn my children and friends into the mess that I didn’t speak to them for more than a year.”

Morris has now turned whistleblower and is helping West Yorkshire police and the Serious Fraud Office (SFO) in their bid to unravel a vast network of transactions in which hundreds of investors have seen their savings wiped out.

The sales of hundreds of properties in Leeds, Cardiff, Liverpool, Glasgow, Nottingham, Derby, Hull and London are being examined by detectives.

However, The Sunday Times has established that the investors in those properties are not the only ones who are set to lose out from the buy-to-let disaster that is rapidly unfolding across the country.

Northern Rock, Bradford & Bingley, Royal Bank of Scotland and HBOS – all banks in which the government has taken big stakes – are set to lose millions of pounds after issuing mortgages on properties that may have been worth only half what they were valued at.

The SFO confirmed last week that it is investigating two large buy-to-let schemes. Police in Greater Manchester, West Midlands, West Yorkshire and London have also launched investigations.

One senior officer, whose force is examining hundreds of allegedly fraudulent buy-to-let sales, said similar alleged scams were likely to emerge across the country. “We can expect to see one or two coming to light in every major city,” he said.

Many of the firms involved used adverts, brochures and a slick sales pitch to persuade investors to buy new-build flats or refurbished houses at allegedly inflated prices with overstated promises of rental income.

Investors, drawn in by the mirage of ever increasing house prices, were attracted by “discounts” of more than 10% and promises of rental income that, in the event, failed to materialise.

At the centre of the Leeds probe is Simon Morris, whose business empire has sold hundreds of properties to investors across Britain.

Morris began in business selling leather coats after dropping out of university. He soon turned to bricks and mortar: he bought his first flat, refurbished it and sold it for a profit.

He then set up Morris Properties, which specialised in residential property for students and young professionals. Along the way he joined a consortium that bought and later sold Leeds United football club.

Last year his fortune was estimated at £69m and he was ranked eighth in The Sunday Times Young Persons Rich List.

When the property market foundered, Morris’s business quickly ran out of new clients. His network of 30 or so firms went bust with debts of £50m three months ago.

Morris was among seven people, including several valuers, arrested in October. “An investigation continues into companies through which a number of people have purchased properties within the buy-to-let market in the Leeds area,” an SFO spokesman said. He added the agency was investigating a second buy-to-let group called Practical Property Portfolio. Five of its directors face trial next year on charges of conspiracy to defraud.

In Leeds, Simon Morris denies wrongdoing. His lawyer said he is threatening legal action against the police.

Yesterday, Morris said that many of his clients had merely invested in the market at the wrong time and were victims of poor judgment. He also denied selling properties at inflated prices and said he had benefited from the lack of local competitors to his firm and the greed of investors. “We were beating them off with a stick,” he said.

But the SFO inquiry is not his only problem. Hammad Ahmad, a solicitor with Max Gold Partnership, says it is preparing a class-action suit on behalf of 133 investors against Morris Properties and several conveyancing solicitors and valuers who are alleged to be involved in the scheme.

Ahmad said his clients included nurses, teachers, doctors, solicitors, building contractors. “Some of the properties were significantly overvalued when they were sold to our clients – in some cases by as much as 100%,” he said.

Richard Lee, a builder from Hull, was the single biggest investor in the Morris Properties scheme. He says he is now £6m in debt and has lost the building company he built up over the past 20 years.

“The past three years have been hell. It’s very hard to battle this kind of thing as an individual,” he said.

Geoff and Jane Morris are taking legal action. “I believe thousands of people have been affected by this,” Geoff said.

“Many people are too embarrassed to speak up but we are still being contacted by people nearly every week who say they were also duped.”

Additional reporting: George Grant