The company kept by Britain's Prince Andrew has been a concern for the royal family for "a couple of years".
According to reports, Queen Elizabeth's second son had been raising eyebrows with his business contacts - including disgraced financier Jeffrey Epstein and a Kazakh billionaire who paid £3 million above the asking price for his Sunninghill home - but has refused to listen to advice.
A source told the Daily Telegraph: "Members of the royal family have been waiting for this to blow up for at least a couple of years. There has been dismay about the company he has been keeping, but he refuses to listen to advice."
Alarm bells reportedly began ringing within royal circles when Timur Kulibayev - the son-in-law of the Kazakh president Nursultan Nazarbayev - purchased the 12-bedroom house four years ago.
Meanwhile, 58-year-old Jeffrey - who is convicted of molesting young girls at his Florida home - has released a statement claiming he is a changed man since his arrest in 2005, although he does not mention Prince Andrew directly.
He said: "Aside from the fact that some of the allegations being levied against me are false, those actions which resulted in my pleading to soliciting a minor for prostitution and soliciting prostitution, as well as those which are the subject of the civil suits being reported on in the media, occurred many years ago.
"This was a different time and chapter in my life and one, with the help of counselling from professionals, I have put behind me.
"I am a different person today than I was then and am focusing on helping the community through educational, scientific and healthcare philanthropic contributions, as well as discharging my responsibility as a financier at the highest professional level."