The pair from the prestigious university are thought to be the ringleaders of a gang involved in a huge money laundering operation, Sveriges Television (SVT) reports.

Ten people have been arrested so far following a long investigation by fraud investigators into reports of false accounting, money laundering and weapons offences.

The main leader behind the gang is said to be a 35-year-old student at KTH, who, together with his 25-year-old, is said to have developed a sophisticated way of laundering more than 100 million kronor using up to one hundred different companies.

Most of the companies involved are in the construction, sheet metal, and roof sweeping business.

By using false invoices, those suspected of involvement in the scheme withdrew sums of more than 100,000 kronor at a time allegedly using a foreign exchange office in central Stockholm.

According to investigators, the two ringleaders netted a profit of around 15 million kronor in the operation, SVT reports.

Police believe that the gang used a premises in the Djurgården neighbourhood of Stockholm as their secret base. A pistol and an assault rifle with ammunition were found at the scene.

When arrested the students admitted to knowledge of the weapons in a hideout that prosecutors believe could also have been used by other criminals to stash weapons.

The two KTH students will stand trial in the Stockholm District Court in two weeks time.