Birmingham owner Carson Yeung has been arrested and charged with five counts of money laundering involving £59million, according to reports in China today.
According to the report, Yeung appeared in court in Hong Kong today to face five counts of "dealing with property known or believed to represent proceeds of an indictable offence".
The charges relate to offences alleged to have occurred between 2001 and 2007, according to prosecutors.
Yeung was released on bail of £558,000 until the next hearing which is scheduled for August 11, the report said.
He was also ordered to surrender his travel documents and report regularly to police.
Yeung bought a 29.9% stake in City four years ago and took full control of the Carling Cup winners midway through the 2009-2010 season in an £81million takeover from David Sullivan and David Gold.
Birmingham issued a statement yesterday insisting the situation with Yeung was not related to the club's holding company.
Acting chairman Peter Pannu said the inquiries have "nothing to do" with Birmingham International Holdings, whose shares are floated on the Hong Kong Stock Exchange.
Pannu also urged people not to jump to conclusions, adding: "People are reminded that in recent years members of the previous board were placed on bail for a significant amount of time and nothing came of it.
"I am only using this as an example to calm any fears. The law says a person is presumed innocent until proven guilty.
"Until I find out more information about this matter there is no further comment to be made."
In a dramatic raid police swooped on his home in The Peak area of Hong Kong yesterday at 10am.
Two hours later he was taken by plainclothes officers by car to a local police station, before later being transferred to the headquarters at Wan Chai.
The Hong Kong Standard reported that officers also went to the offices of Birmingham International Holdings, in Sheung Wan, the company which controls the football club, leaving with a number of documents.
It said police had launched an investigation two years ago into at least 600 million Hong Kong dollars in cash and securities from unidentified sources being deposited in a bank account.
Mr Yeung spent last night in police custody.
Blues fans have spoken of their shock and disbelief after the dramatic events.
The move has stunned supporters and throws the club into turmoil once again.
It comes just weeks after the double blow of relegation and losing manager Alex McLeish to bitter rivals Aston Villa.
The statement from Hong Kong police said: “Police arrested a male, aged 51, in connection with a money laundering case.
“Narcotics Bureau officers also searched a total of two locations, one on Hong Kong Island and one in Kowloon, and seized some documents.
“The arrested person has been charged with five counts of dealing with property known or believed to represent proceeds of an indictable offence.
“He has been detained in custody and will appear in Eastern Magistracy on June 30. An active police investigation is underway.”
It is understood that those convicted in Hong Kong of money laundering face jail terms of up to 14 years, and fines of five million Hong Kong dollars.
Birmingham City has also put out its own statement, saying that there is no cause for concern.
Acting chairman Peter Pannu said: “Carson is assisting with enquiries that have nothing to do with the operation of Birmingham International Holdings in Hong Kong and therefore nothing to do with the operation of the club and relate to other matters.”
Mr Pannu told the Birmingham Mail that he would not make any further comment until he had found out more from the Hong Kong police.
The message boards and Twitter have been buzzing since the story broke, with the most common reaction being one of disbelief and fears over the future.