London-based tycoons Robert and Vincent Tchenguiz were apprehended as part of a series of early-morning raids across the capital, although the pair insisted in a statement published later that they were "confident" of being cleared.
Following the arrests, the Serious Fraud Office (SFO) indicated that it was looking to identify whether false representations had been made by the bank to British clients and was taking a particular interest in the high-yield Kaupthing Edge account.
"This is a complex investigation which crosses numerous jurisdictions," a spokesman explained.
"We have been working closely with the Icelandic Special Prosecutor's Office to ensure that comprehensive and robust investigations are conducted."
Bloomberg subsequently reported that the Tchenguiz brothers were released without charge pending further investigation and may attend a planned party on a yacht in the French resort of Cannes as part of the ongoing Mipim expo.
Kaupthing was among the lenders which failed during the banking crisis of 2008, which saw Icelandic government regulators take control of the firm after the entire board of directors resigned from their posts.
The state takeover came just one day after the UK Financial Services Authority urged 30,000 British depositors - some of which included public sector organisations - to move their money elsewhere before Kaupthing defaulted.
In July 2009, Wikileaks published the company's loan book containing details of large amounts of credit provided by Kaupthing in the run-up to its collapse the previous October. The bank subsequently threatened the website with legal action.
By Asim Shah