The Serious Fraud Office (SFO) has made seven arrests and raided nine sites across the South East of England in connection with the collapse of the law firm Axiom Ince.

More than 80 SFO investigators, accompanied by Metropolitan Police officers, were involved in the operation early this morning which saw the suspects brought in for questioning as searches were conducted for potential evidence.

In a statement, the SFO said around £66m of client money was missing from Axiom Ince’s accounts and had been spent when the Solicitors Regulation Authority (SRA) shut the firm down on 3 October.

“Investigators will also examine how funds passed from the firm’s client accounts with Barclays to the State Bank of India to fund these purchases,” the statement said.

Axiom Ince was founded in May, after the national firm Axiom DWFM bought venerable shipping practice Ince out of administration. Two months later Axiom Ince acquired national insurance law firm Plexus in similar circumstances.

According to the SFO, the firm was operating out of 14 offices in England and Wales and employed more than 1,400 staff when the SRA made what amounted to its largest-ever intervention into a law firm.

The specialist fraud prosecuting agency said it had been referred the case by the police “due to the complexity of the alleged fraud” and that the two bodies “will continue to work closely together on the investigation”.

SFO director Nick Ephgrave QPM said: “There are a number of significant questions that need to be answered: clients from this law firm are missing many millions of pounds and more than 1,400 of its staff have lost their jobs. The impact on those affected is extremely serious.

“This morning, we have used our specialist powers to obtain important information that will help us get to the bottom of what happened.”

The Axiom Ince scandal first hit the headlines in August when the SRA suspended managing partner Pragnesh Modhwadia for suspected dishonesty along with two other directors for allegedly breaching solicitors’ rules.

The firm’s demise looks set to have major repercussions on the solicitors’ profession given a warning by the SRA that additional levies to the Compensation Fund – the profession’s insurer of last resort – are likely.

This has put the spotlight on the SRA’s oversight of Axiom Ince’s acquisitions in the run up to its collapse amid calls by the Law Society of England and Wales and the City of London Law Society for the profession to be consulted over the regulator’s plans.

In the wake of today’s arrests by the SFO, the SRA has published a detailed statement defending its approach to regulating Axiom Ince and promising a review of the supervision of accumulator firms.