The investigation of Tsvetan Vassilev, who owns a majority stake in Corporate Commercial Bank (Corpbank), was instigated after a Liechtenstein bank submitted information to the authorities, Liechtenstein's chief public prosecutor told Reuters.

Bulgaria's Corpbank was hit by a run on deposits in June, prompting the central bank to seize control and freeze customers' deposits pending an independent audit into the lender's books. Vassilev was subsequently charged with embezzlement and gave himself up to authorities in Serbia after an international arrest warrant was issued against him.

Vassilev, who was feuding publicly with a powerful rival at the time of the bank run, has strongly denied any wrongdoing and said the run was a plot hatched by his competitors.

Bulgarian prosecutors on Tuesday said that Liechtenstein was investigating Vassilev but did not specify why. Vassilev's lawyer told Reuters he knew nothing of such an investigation.

However, in a statement to Reuters on Wednesday, Liechtenstein's chief public prosecutor Robert Wallner said an investigation had been launched on suspicion of money laundering.

"Proceedings were initiated after a Liechtenstein bank made a report at the Financial Intelligence Unit (FIU) according to due diligence law, and the FIU passed on this notification to us," Wallner said, adding that no further details could be given because inquiries are at an early stage.

It remains unclear whether Bulgarian authorities will rescue Corpbank or allow it to collapse, whether taxpayers will have to foot part of the bill and how the bank's depositors and bondholders will be treated. Earlier attempts to solve the crisis stalled in the run up to a general election on Sunday.

Angry customers, still unable to access their deposits more than three months after the bank closed, have staged regular protests in the Bulgarian capital and elsewhere.

Preliminary investigations into Corpbank have revealed that documentation on a large chunk of its loan book was missing and pointed to activities that the central bank described as incompatible with the law and good banking practice.

(Writing by Matthias Williams; Editing by David Goodman)

By Caroline Copley