AIB lent more than €800m for property purchases to companies linked to Greek businessman Achilleas Kallakis, who is under investigation by the Serious Fraud Office (SFO) and City of London police for alleged fraud against Ireland's largest bank.

AIB, which declined to comment, seized back the assets and subsequently sold them to Green Property, the Irish property development company headed by Pat Gunne, which financed the purchase with €750m of debt from AIB.

AIB has booked a write-down of €60m in relation to the loans to the Kallakis companies. Among the properties AIB lent to was a residential development at St James Square where Kallakis had claimed to have sold a penthouse apartment for £100m, a world record. It is understood the sale was never completed. AIB lent the money to companies linked to Kallakis between 2003 and 2007.

"The main suspect operated with the assistance of others," the Serious Fraud Office said last week. It did not return a call seeking further comment.

The alleged fraud came to light last year when AIB identified problems with part of its security interests over the portfolio.

"Following an internal review it became apparent that the guarantees of certain lease payments on these properties by an investment grade counterparty (a blue-chip property company) were fraudulent," the SFO said last week.

The fraud involved inflating the rent of the properties and the lease lengths. This increased the value of the properties as real estate is valued on a multiple of the annual rent, with the multiple increasing the longer the lease has to run.

AIB is considering legal action against a number of parties in respect of its deficit and the SFO believes other financial institutions may have been deceived.

Kallakis was a regular on the international poker circuit, where he was known as The Don.

The purchase by Green of the Kallakis properties is viewed in Britain as a signal of its re-emergence in the market there and the company is understood to have a substantial war chest to fund other sizeable acquisitions from distressed vendors.