A British citizen and her German partner were held without charge in an Egyptian jail for over four weeks, falsely accused of trafficking two people they had never met, and later illegally deported, the pair have alleged to the Guardian.

Their experience has shocked the large expatriate community in the sleepy beach resort of Dahab, in Egypt's southern Sinai peninsular, which has long been considered a tourists' paradise.

The pair's ordeal began on 21 September, when they say scores of armed police stormed their shared Dahab home, arrested them, and took some of their possessions. Wendy, 40, and Peter, 49, who asked not to be identified by their surnames, were detained without proper legal representation for the next month.

The duo were accused of smuggling, from Egypt to Israel, two missing Chinese women they say they had never met. The couple's passports however proved they had returned from a trip to Asia a day after police originally claimed the Chinese women had gone missing. When they did not confess to the allegations, the two said they were threatened with additional charges – including murder and espionage. For much of their ordeal, they were denied access to lawyers and to their friends and embassy officials.

"The worst thing was that we weren't able to contact anybody," said Wendy, by Skype from Thailand, where the pair are now staying while they work out where to live next. "Not our family, the lawyers, the embassy – we didn't know what the police was going to do to us."

Wendy, who holds both British and Hong Kong passports, also claimed police later asked her to call the Chinese embassy in Cairo, to pretend she was one of the missing Chinese women and say she was safe and well in Israel. "It seemed like they wanted to cover something up, like they wanted to show the Chinese embassy they hadn't made any mistakes," said Peter.

"And the easiest way of getting rid of the problem was to say that Peter had smuggled them to Israel, and that they were no longer in the country," said Ramast Magdy, a computer scientist who tried to help the couple.

During their incarceration, police claimed the pair were spies, in order to intimidate local lawyers from trying to represent them. Their friends told the Guardian that they were also threatened with arrest if they tried to help them. "The police said: 'he was a spy, and we found with him a spying machine – and if you come close, you'll get put inside too'," said Joseph Nazir, a local travel agent.

The accusations were eventually dropped after the duo were eventually granted proper legal representation, and were never charged. But their ordeal was not over, after police decided to deport them despite the lack of a conviction towards the end of October.

Their ordeal has frightened other expatriates living in Dahab, who had previously assumed the town was safe for foreigners. "This was the last nail in the coffin," said Rosemary, a British woman who has lived in Dahab since 2010, but who decide to return to the UK this week after being frightened by Wendy and Peter's experience.

"Before we felt a bit protected – we knew this would happen to Egyptians all the time, but it never happened to foreigners," said Natasha, an expat who has lived in Dahab for nearly a decade, and who asked the Guardian not to disclose her real name. "Now we're really scared because it's a sign it can happen to any of us."

Egypt's interior ministry refused to answer questions about the case by telephone, and had not responded at the time of writing to questions submitted by email.