A FORMER City trader is on police bail after being arrested over allegations of an investment scam said to have run into millions of pounds.

The 49-year-old man, who lives in Ipswich, was arrested by police on suspicion of fraud by false representation.

He has been released on bail, pending further inquiries and is due to report back to police on July 17. Although the suspect was originally arrested in March this year, the allegations first surfaced towards the end of 2010 when the man lived in Frinton.

Detectives from Essex Constabulary were called in after accusations were made by investors who claimed to have lost their money.

At the time investors who also lived in Frinton were said to have put in funds because they heard they could make large returns on their investment in a short period of time.

Members of the town’s rotary, cricket and golf clubs were all reported to have lost substantial sums when the allegations came to light.

Many of the suspect’s clients were said to have been friends and neighbours.

Late in 2010 accountants acting on behalf of the fraud suspect wrote to investors to inform them that he was declaring himself bankrupt.

The letter was addressed to ‘All Known Creditors’. It was said to have stated that the suspect was insolvent and had been left with no choice but to take steps to declare himself bankrupt.

The bankruptcy notice was filed with Colchester County Court early last year.

The first official meeting between the creditors and the Official Receiver was arranged for March 23 last year at St Clare House in Princes Street, Ipswich.

Referring to the current police inquiry, a spokesman for Essex Constabulary said: “We can confirm that there is currently an ongoing inquiry relating to a 49-year-old man who has been arrested on suspicion of fraud by false representation.”