A MONEY-LAUNDERING investigation into Michael Brown, the Liberal Democrats’ biggest backer, spread to Spain as police seized £10 million of assets in Majorca yesterday.

Spanish and British officers took possession of five properties, a new Porsche Cayenne and a Bentley, a £400,000 yacht, paintings, computers and documents. Mr Brown’s record £2.4 million gift, paid through his London-based investment arm 5th Avenue Partners, is being scrutinised by the Electoral Commission.

The Liberal Democrats will have to surrender the donation unless it can be shown that the company was carrying on business in Britain when it wired the money. Each of the party’s 73,000 members would have to pay about £30 to settle the bill.

More than forty officers, six of them British, began searching Mr Brown’s Spanish business empire. They visited the villa, in Esporles by the Sierra de Tramuntana, where he was arrested hours before his 40th birthday celebrations last month.

Officers from the Spanish National Police serious fraud branch, its international division in Madrid, and City of London Police, began examining Mr Brown’s offices in Palma. His yacht was impounded at a cove in the west of the island. Each asset seizure was accompanied by a magistrate.

Police questioned Jennifer Stone, Mr Brown’s personal assistant, at her home near Palma, as a potential witness.

In Britain, police have arrested two men as inquiries continue into 5th Avenue Partners. Basil Aucott-Young, a legal adviser from Cornwall, and Bob Minton, a broker from Lichfield, were questioned and bailed until September. Neither was charged.

Mr Brown was extradited to Britain on Tuesday on a warrant issued by Bow Street Magistrates’ Court, where he appeared briefly on Wednesday. He has been held in connection with a criminal prosecution launched by his bank, HSBC, for allegedly faking documents showing purported trading of $1 billion (£530 million) on financial markets.

The bank has made 51 allegations of forgery, false accounting, perverting the course of justice, perjury and deception. Mr Brown strongly denies them and agreed to be extradited to fight the claims.

During his flight home, he told The Times that he wanted to get matters resolved quickly. “This dispute is just a disagreement between a bank, the investors and me,” he said. He has been remanded in custody at Wormwood Scrubs prison.

Police want to question him over allegations that he lied to get a replacement British passport. HSBC is suing him in the High Court to trace $45 million (£24 million) of assets in 5th Avenue Partners.

Complaints from investors led to a three-month investigation headed by Detective Chief Inspector Bob Wishart from the City of London Police economic crime department.

Martin Edwards, the former Manchester United FC chairman and an investor in the company, was arrested on suspicion of money laundering, but police have exonerated him, regarding him as a victim of high-yield investment fraud.

The investors, including Mr Edwards, two Chinese cosmetics tycoons and a retired Los Angeles lawyer, have asked the Lib Dems to return their money, but the party refused. The Lib Dems said: “We believe that we acted in good faith at all times. We are quite certain it is a permissible donation.”

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