A SCOTS firm is at the centre of the world’s biggest copyright investigation involving $1 billion worth of illegally copied films, video games and music.

The business, a shell company with a virtual office in Glasgow’s Bath Street, has been named by American investigators probing a global network of digital bootlegging sites.

Agents from the elite Homeland Security agency allege Castleton Trading, a Scottish limited partnership or SLP, has been used to funnel payments from a massive online counterfeit operation.

READ MORE: Reputation just one victim of bootleggers

The Glasgow-registered firm is just the latest of scores of SLPs – businesses which under an obscure reserved Scottish corporate law are allowed to have secret owners, pay no taxes and publish no accounts – caught up in international scandals.

An affidavit filed by Homeland Security at a court in Chicago claims Castleton Trading played a key role in a multilingual empire of websites called KAT showing movies, such as this summer’s Independence Day and Captain America sequels, for free.

Just one of the peer-to-peer file-sharing websites, KAT stands for “Kickass Torrents”, ranked as the 70th biggest in the world at its height with advertising revenues running into tens of millions of dollars.

READ MORE: Reputation just one victim of bootleggers

Homeland Security alleges that the sites were used by the operation’s ringleader Artem Vaulin, a 30-year-old Ukranian, better known online as “Tirm”.

Mr Vaulin was arrested in Poland this summer. American officials are seeking his extradition to face charges that include conspiracy to commit criminal copyright infringement and conspiracy to commit money laundering.

The complaint said officials were able to track and identify Mr Vaulin from records provided by Apple on his iCloud account.

Homeland Security claims that KAT sites were charging $300 a day just for a small button advertisement on their sites. Profits for the year, they said, reached $16 million.

READ MORE: Reputation just one victim of bootleggers

The Americans believe that British companies, including Castleton Trading, and bank accounts in Latvia were used by Mr Vaulin to process profits from the KAT sites. KAT has moved its domains several times after being blocked in Britain, Ireland, Italy, Denmark, Belgium and Malaysia, according to the complaint, and has relied on a network of computer servers located around the world, including in Chicago.

Other SLPs have cropped up in several Herald investigations into unethical or criminal e-commerce.

They have been used, for example, as fronts for online sales of defective diet pills, essay mills which carry out coursework for students and peer-to-peer file-sharing websites which are under investigation for hosting images of child sex abuse.

The same kind of companies – along with other British brass plate businesses which exist only to provide a bank account in Latvia – have been named in several prominent corruption investigations, including into Ukraine’s “arms mafia” where an Edinburgh-registered business was allegedly used to skim profits from exports of bullets to the Middle East.

SLPs are being sold off-the-shelf as “Scottish zero-tax offshore” companies throughout Eastern Europe with some 500 new “firms” being registered every month.

READ MORE: Reputation just one victim of bootleggers

The Scottish Government has lobbied its UK counterparts to review SLPs amid fears that their opaque ownership structure is being exploited by gangsters and tax evaders.

Labour, Greens and Liberal Democrats have all called for action.

The Conservatives, however, last month rejected an SNP call in the House of Commons to look into the issue.

Roger Mullin, the SNP’s Treasury spokesman in Westminster, said: “Scottish limited partnerships are not merely being used for aggressive tax avoidance.

“They have become a key tool for international criminality.

“I am increasingly angry that the UK Government is continuing to drag its heels on this issue.

“For example, the KAT case is the biggest of its kind and a company at its centre is registered in Scotland.

“This cannot be in Scotland’s interests. Scottish limited partnerships do Scotland a lot of reputational damage and we need action on this urgently.”

In August, Oxfam launched a campaign to close the legal loophole it claimed was turning Scotland into a tax haven. Tax expert Gary Deans previously said: “There is a real danger that Scotland’s reputation is tarnished as a consequence.”

READ MORE: Reputation just one victim of bootleggers

Filings at Companies House shows that Castleton Trading was dissolved on August 22, a month and a half after the Homeland Security affidavit was filed.

There was no way of contacting any of the companies from offshore jurisdictions which have been partners of Castleton Trading. The business, like all other offshore-controlled SLPs seen by The Herald, has never filed any accounts.