Former Darlington Football Club chairman George Reynolds today lost a legal bid to force police to hand over £500,000 seized when he was arrested on suspicion of money-laundering.

The flamboyant businessman, a one-time safe-cracker who went on to build a multi-million business empire, was fighting the seizure made under the Proceeds of Crime Act.

He was arrested along with business associates Richard Tennick and Ian Robinson on Monday.

In the boot of Mr Reynolds' car police found £500,000 in cash.

All three were quizzed by police for eight hours before being released on bail pending further inquiries.

At Darlington Magistrates' Court today, police and officers from the Regional Assets Recovery Team were seeking a three-month forfeiture under civil law of the cash to allow further investigations to the source of the money.

Police believe the cash is part of an £800,000 sum paid to Mr Reynolds by Darlington FC.

Mr Reynolds denies this and said the money had been paid to him by two members of the Sterling Consortium.

They had saved the club from extinction after buying it out of administration.

Mr Reynolds was born in Sunderland and spent half his childhood in an orphanage. Later came a string of convictions and jail sentences.

On his release he moved into the kitchen worktop business and created a company that earned him millionaire status.

He bought Darlington FC in 1999 and spent millions attempting to transform The Quakers fortunes, but the club finished seventh from bottom of Football League and Division Three this season.

He quit as chairman in January when Darlington went into administration.

JPs accepted the application but with a limit of just 28 days meaning police will have to come back to court by July 14 to seek a further order. They also rejected a bid by the prosecutor, Graham Duff, to ban the publication of today's proceedings under The Contempt of Court Act.

Det Sgt Martin Fleming, from the Regional Assets Recovery Team, told the court that the case centred upon sums transferred from Darlington FC to Mr Reynolds.

''My suspicion at the time and the reasons for the seizure of these funds is based on some unlawful conduct.

''Until we have conducted the investigation we will not be able to say whether the cash has been derived from unlawful conduct.''

Mr Reynolds, 67, of Witton Hall, Witton-le-Wear, near Bishop Auckland, County Durham, told the court: ''All I have done is sold my house and taken the cash out. It is my money and I can do what I want with it.''

During a theatrical performance, Mr Reynolds, who was ranked in a Sunday newspaper's 2000 rich list as being worth £260 million, added: ''It is very, very sad and a great miscarriage of justice. I have sold my house and got the money from the bank and I can do what I want with it.''

He claimed he had invested £27 million of his money into Darlington and had got just £150,000 back when he left, which he described as ''chicken feed''.

The money was for ''personal effects'' that included a £21,000 Gucci table and chairs that Mr Reynolds had bought, the court heard.

JP John Robinson said the bench was satisfied the police needed further time to investigate and granted a temporary forfeiture order for 28 days.