A Bermuda company reportedly owned by notorious arms dealer Adnan Khashoggi is linked to a Minneapolis stock brokerage being put out of business through a dubious stock manipulation scam.

A story this week in the Star Tribune newspaper reported that the Stockwalk Group collapsed last year as the "direct result of an orchestrated stock fraud in which the brokerage was made a patsy for Mr. Khashoggi." The allegations were made public when a lawsuit was unsealed last week in US Bankruptcy Court.

The lawsuit was said to be the culmination of a year-long investigation into a "complicated series of transactions".

Mr. Khashoggi, a Saudi Arabian arms dealer linked to the Iran-Contra scandal and more recently, the collapse of a Thai bank - and who is said to have possible financial ties to Osama bin Laden - was named last year as being behind Bermuda company Ultimate Holdings Ltd., when it was put under examination by the US Securities and Exchange Commission (SEC).

Mr. Khashoggi was reportedly - through Ultimate Holdings Ltd. - a major stakeholder in a Van Nuys, California based interactive marketing concern called GenesisIntermedia Inc. In addition to SEC scrutiny, Mr. Khashoggi and Genesis are faced with several legal actions.

News of this latest action follows a complex investment scheme that reportedly brought down the Stockwalk Group and involved the shares of Genesis, according to the Star Tribune report.

James Stephenson, a Minneapolis attorney overseeing the liquidation of Stockwalk subsidiary MJK Clearing alleges that "the defendants conspired on an unusual strategy for inflating the stock price of the money-losing company: Instead of selling the shares outright which could trigger a sudden collapse in the share price, they instead arranged to lend the shares through a chain of brokerage firms including Stockwalk's MJK Clearing subsidiary. The men - Mr. Khashoggi and up to a dozen other defendants, including Genesis CEO Ramy El-Batrawi - pocketed the loan proceeds with no intention to repay," according to Mr. Stephenson's court filing.

Mr. Khashoggi through Ultimate Holdings, which was classed as a Bermuda investment company, was reportedly at one time the 40 percent shareholder of GenesisIntermedia stock.