LONDON—Authorities in the U.K. and Iceland arrested nine men in connection with the collapse of Kaupthing Bank hf, once Iceland’s largest bank, in the latest arrests connected to the failure of the island’s banking system.

The U.K.-led probe is examining the extent to which funds were withdrawn from the bank prior to its 2008 collapse and who was involved.

Among those arrested Wednesday were colorful UK property tycoons Robert and Vincent Tchenguiz. The brothers have held large stakes in well-known British companies, including supermarkets and pubs. Robert Tchenguiz was one of Kaupthing’s biggest retail borrowers and has been a board member of an Icelandic insurance company that was a shareholder in the bank.

In a joint statement, the brothers said: “We were arrested earlier this morning and are being questioned with regard to matters relating to our relationship with Kaupthing bank. Both of us are co-operating fully the investigation and are confident that once concluded, we will be cleared of any allegation of wrong doing.”

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