Court jesters are a very rare breed these days.

The island nation has for almost two years accused the king's former jester - American national Jesse Bogdonoff - of mismanaging a $26m trust fund.

Tonga alleged Mr Bogdonoff invested unwisely and took inflated commissions.

But they have now come to an out of court settlement under which neither side has to admit any liability.

Relief

The row centred around Tonga's claim that Mr Bogdonoff, who says he is the world's only court jester, cheated King Taufa'ahau Tupou IV and his government out of the money the country made from selling citizenship to Hong Kong Chinese people ahead of the 1997 handover of the former British colony to Chinese rule.

Mr Bogdonoff, a former banker, was entrusted with the $26m Tonga Trust Fund in 1999, which he was to invest through his company Wellness Technologies.

Some $20m of the fund's money allegedly evaporated after Mr Bogdonoff invested it in life assurance for the terminally ill, through a US corporation called Millennium Asset Management.

This firm went bankrupt in 2002, with Tonga accusing both Mr Bogdonoff and the company of siphoning off cash in bogus fees and commissions.

"I think this settlement is a relief for everybody on both sides of the aisle," said Patrick Richardson, a lawyer for Mr Bogdonoff.

"It's a very complicated case and both sides realised that there are pros and cons to each of their cases and that you have to take a look at the potential downsides."

The scandal is said to have caused great anguish for Tonga's 85-year-old King, who reigns over 100,000 people across 170 coral islands in the South Pacific.