Italian prosecutors said Tuesday they have put a former executive of Banca Nomura International PLC, a unit of Nomura Holdings Inc. (TYO:8604), and a current managing director for the Japanese bank, under investigation and seized €1.8 billion ($2.35 billion) from Nomura.

The move, according to Agence France-Presse, is part of a larger inquiry into alleged fraud related to a derivatives arrangement between Nomura International and M.P.S., or Banca Monte dei Paschi di Siena SpA (BIT:BMPS), Italy’s third-largest bank and the world’s oldest, founded in 1472.  

Officials in Siena, where M.P.S. is based, said the money includes commission and collateral put forward by M.P.S. They also said that the two bankers -- Sadeq Sayeed, who headed Nomura’s Europe and MENA operations until 2010, and Raffaele Ricci, who still works for the bank out of London -- put out false statements and obstructed regulatory officials.

They also seized €14.4 million from three other former executives, including €9.9 million from former general manager Antonio Vigni.

The alleged fraud revolves around the "Alexandria transaction", in which M.P.S. bet on risky credit derivatives known as C.D.O. squareds. In 2009, these investments were threatening the bank with €220 million in losses. The fraud investigation is focused on what happened next. Prosecutors say M.P.S. sold the securities, known as CDO squareds, to Nomura at an above-market price to cover up the loss. The deal was struck in a way that Nomura made a profit and M.P.S. was able to deny the loss for a period of time.

Nomura denied any wrongdoing in January, but all sides have so far been quiet about the latest development.

Banca Monte dei Paschi has been at the center of a fraud scandal since January. Officials at the bank allegedly used derivative deals to hide financial losses.

The Italian bank has retaliated by filing a civil lawsuit against Nomura, Deutsche Bank AG (FRA:DBK) and others.