What sort of police sting operation costs £25m and sees the defendants walk free? Well, a Scotland Yard operation that a Judge labelled “massively illegal”. The case took five years. The result? Zip. Oh, yeah. Plus that £25m.

An undercover police operation in which a bogus company set up by Scotland Yard laundered £15m of suspected drugs money was declared “massively illegal” by a judge yesterday who described it as a “state-created crime”.

Ten defendants accused of money-laundering offences were freed after a five-year court case that has cost the taxpayer an estimated £25m. The case against two men, including a lawyer from Gibraltar, amounted to entrapment, the court decided.

Scotland Yard defended its operation, and said yesterday’s ruling ­ which followed 418 days of court hearings ­ was a blow to future undercover operations. It said the sting, codenamed Operation Cotton, had already helped convict 21 people for drug offences involving a total of 4,000kg of cannabis and 100kg of cocaine.

The operation began 14 years ago and ran over a 10-year period. It was aimed at alleged drug barons using Gibraltar and other routes to launder their profits. The principal target of the operation was offered a 5 per cent fee for all the money he put through the fake firm. Once “cleaned”, the cash was handed back to the suspected traffickers to allow police to continue gathering evidence.

A financial company, set up with Scotland Yard’s approval, came complete with bogus records filed by accountants who were granted immunity from prosecution. The firm had four staff based at offices in London, and false accounts lodged with Companies House.

The result was a “honeypot” designed to trap as many people as possible.

But Judge Bathurst-Norman, sitting at Southwark Crown Court in London, said: “Laundering money in such large quantities back to suspect criminals will raise question marks in any right-thinking member of the public.”

During his three-day judgment, the judge strongly condemned both the investigation and the way in which the case was subsequently handled. He said the criticism of the police was due to their “incompetence” and “cavalier” approach to the law ­ rather than a question of “bad faith”.

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