Vote Leave is being investigated over whether it broke strict election spending limits during the EU referendum campaign by donating hundreds of thousands of pounds to a campaign run by a 23-year-old fashion student.
The Electoral Commission announced on Monday afternoon that it would investigate possible breaches of election law by the official pro-Brexit campaign in relation to two large donations it made in the final weeks of the campaign. The commission said it now had "reasonable grounds to suspect an offence may have been committed".
BuzzFeed News has extensively documented how student Darren Grimes received £625,000 from Vote Leave, which was then spent on targeted Facebook advertising with a Canadian firm called AggregateIQ, which was also Vote Leave's online ad agency.
BuzzFeed News also revealed that Vote Leave donated £100,000 to a group called Veterans for Britain, which also spent the money with AggregateIQ.
In its announcement on Monday, the commission said it was investigating whether Grimes and Veterans for Britain had delivered incorrect spending returns in relation to the Vote Leave donations. It was also looking at whether Vote Leave delivered an incorrect spending return and whether it had exceeded its spending limit.
Both Vote Leave and the pro-EU Stronger In campaigns were subject to strict spending limits of £7 million during the referendum campaign, to ensure a fair battle and stop either side using its excessive financial power to crush the other.
However, campaigns were legally able to donate excess funds to parallel campaign groups – but only if there was strictly no coordination or instructions in terms of how the money was spent.
Until now, the Electoral Commission has accepted the word of Vote Leave and Grimes that the financial arrangement did not break the rules and it was entirely coincidental that the money given to Grimes was then spent with Vote Leave's own favoured advertising company.
Grimes, whose campaign was called BeLeave, was a regular fixture in the Vote Leave office during the campaign and now works for Brexit Central, a website run by former Vote Leave campaigners.
In February, the Electoral Commission told BuzzFeed News that it could not prove any break of the rules "beyond reasonable doubt", after Labour MP Stephen Kinnock wrote to demand an urgent investigation into the arrangement.
The commission said it was now launching an investigation because "new information has come to light".
Its statement continued: "There is significant public interest in being satisfied that the facts are known about Vote Leave’s spending on the campaign, particularly as it was a lead campaigner with a greater spending limit than any other campaigners on the ‘leave’ side.
"Legitimate questions over the funding provided to campaigners risks causing harm to voters’ confidence in the referendum and it is therefore right that we investigate."
Last November Grimes strongly denied any wrongdoing: "BeLeave used AggregateIQ services to help advertise to supporters online during the referendum. This has all been declared as required by the Electoral Commission."
Vote Leave finance director Antonia Flockton told a Commons select committee last year: "There is a question as to whether they were independent campaigns acting independently. They were. Therefore, there is no issue in relation to our expenditure."
The commission is already investigating the funding arrangements of the parallel pro-Brexit campaign Leave.EU, run by Bristol businessman Arron Banks and endorsed by Nigel Farage's UKIP.