Investigators probing one of the world’s largest financial frauds have said they suspect $340m (£255m) held in the bank account of a major London law firm is linked to money allegedly embezzled from the Malaysian state investment fund 1MDB.

According to court papers, Malaysia’s anti-corruption agency is urgently trying to prevent City firm Clyde & Co from releasing the large sum of money, which they suspect can be traced to proceeds of the multibillion-dollar 1MDB fraud.

The sprawling 1MDB scandal has shaken Malaysian politics in recent years and sparked investigations around the world into how billions of dollars were siphoned from the fund and laundered through an elaborate network of bank accounts and offshore companies to pay bribes and finance luxury lifestyles.

Last week, the country’s former prime minister Najib Razak was found guilty on seven charges linked to the 1MDB fraud in the first of a series of trials related to the fraud. Earlier in July, Goldman Sachs reached a $3.9bn (£3.1bn) settlement with the Malaysian government in connection with the affair.

The $340m said to be in the bank account of Clyde & Co is linked to a Saudi businessman, Tarek Obaid, who US and Malaysian prosecutors have alleged is implicated in the fraud against 1MDB. In February, Obaid, who has consistently denied any wrongdoing, was charged in Malaysia with money laundering and engaging in a criminal conspiracy with Razak.

After charging Obaid earlier this year, Malaysian prosecutors turned their attention to money held in multiple UK bank accounts which they suspect is linked to a joint venture company formed in 2009 between 1MDB and PetroSaudi, an oil business established by Obaid with a member of the Saudi royal family.

US and Malaysian prosecutors have alleged the joint venture was used to misappropriate hundreds of millions of dollars from 1MDB. According to prosecutors, Obaid was closely involved in the partnership and in 2017 the US moved to seize some of his assets allegedly purchased using 1MDB money.

Malaysian investigators told a court in Kuala Lumpur in July that Clyde & Co was seeking to “utilise” the $340m after agreeing last year to release the money to companies believed to be controlled by Obaid.

Andy Kerman, one of Obaid’s lawyers in the UK, told the Guardian his client denied any wrongdoing in connection with the joint venture. Obaid’s advisers, he added, “are in touch with the relevant authorities.”

Last month, the high court in Kuala Lumpur granted Malaysian prosecutors a temporary preservation order on $340m placed in a Clyde & Co escrow account to be paid out to PetroSaudi as an award in the arbitration.

Malaysia’s anti-corruption commission (Macc) told the court they suspect PetroSaudi’s drilling ships were purchased using proceeds of the 1MDB fraud and therefore income generated by the drilling operations in Venezuela belongs to 1MDB and should be preserved for the Malaysian state fund.

Macc said Clyde & Co had “recently applied” for permission from the UK’s National Crime Agency to utilise the money and make payments to Obaid or his oil business. In court filings, the investigators said the temporary freeze order was needed “as a matter of urgency” to avoid the dissipation of the assets.

According to local media reports, Malaysia’s deputy public prosecutor said once the order was granted it would be shared with UK authorities, who they hope will enforce the order. Last week, Obaid’s lawyer applied to amend the order, though details of the application are unclear.

Clyde & Co did not respond to the Guardian’s questions about whether any money had been distributed to Obaid or what due diligence the firm had conducted before allegedly entering into agreements to move the funds. A spokesman for the firm said it was unable to comment due to client confidentiality.

He added: “As a firm we hold ourselves to the highest professional and ethical standards and take responsibility for ensuring we meet all of our professional, legal and regulatory obligations.”

No criminal charges have been filed against Obaid in the US, however in civil asset seizure proceedings in 2016 and 2017 US prosecutors alleged he was involved in the first phase of the 1MDB fraud. Obaid disputes the allegations and has resisted the seizure.

The US investigation into 1MDB came after British investigative website the Sarawak Report obtained a cache of documents relating to PetroSaudi. The leak led to what the US attorney general at the time described as “the largest kleptocracy case” in US history.