A fraud investigation into the card processing company blamed for the collapse of Scottish budget carrier Flyglobespan has been dropped.

The Serious Fraud Office (SFO) has called off its eight-month investigation into E-Clear, which was run by flamboyant Cypriot entrepreneur Elias Elia.

SFO officials have declared that there was “insufficient evidence” to pursue a prosecution against E-Clear, which collapsed in January 2010 owing an estimated £127 million.

A few weeks earlier Flyglobespan and its parent company Globespan went under, leaving thousands of holidaymakers stranded abroad.

Globespan’s receivers, PricewaterhouseCoopers (PwC), blamed the failure of the Edinburgh-based airline on the behaviour of E-Clear, which it claimed had withheld £25m worth of the airline’s fares while negotiating to buy it out.

Receivers for E-Clear also discovered debts of some £127m and linked its business with the collapse of several other airlines, including the Scottish-owned Canadian operator Zoom.

An investigator told The Scottish Herald newspaper: “Following a review of this case, a decision has been taken to close the investigation as there is insufficient evidence to give rise to a realistic prospect of conviction.”

The investigator, however, said that the Insolvency Service was continuing with a separate probe into E-Clear and its director, Elias Elia.

Elia, 41, is currently facing a High Court action by BDO, the firm acting as administrators for E-Clear. It is trying to get him to release £4.3m it says he owes the company and its creditors.

The Herald last year reported that Elia and E-Clear had gone on a spending spree in the company’s final months of trading, including buying a fleet of luxury cars and an apartment worth £3.6m in Knightsbridge.

It is understood those cars, including a Rolls-Royce, and the flat are being targeted by BDO’s lawyers.