Dave King warned concerns about the sources of funds available to Craig Whyte in the Rangers takeover could lead to a "formal investigation" by police, a court has heard.

Mr King, who is the current Rangers chairman, raised the issue in a letter to the takeover panel on April 26, 2011, about two weeks before the closing of the deal with the businessman.

Whyte, 46, is on trial at the High Court in Glasgow, where he denies acquiring the club fraudulently in May 2011.

Cross-examining former Rangers owner Sir David Murray, Donald Findlay QC, who is defending Whyte, asked him: "What had these men done to our club?"

Mr Findlay also read from a letter Mr King wrote to the takeover panel.

In the letter, Mr King wrote: "There is concern at a proposal by Mr Craig Whyte to acquire a controlling interest in Rangers Football Club by purchase of the total share hold currently owned by Murray Group.

"There are concerns about the sources of the funds that are available for the potential acquisition and that this may lead to formal investigation by the policing authorities responsible for these matters."

Asked if he was aware of this, Sir David replied: "Not at all."

Mr Findlay also produced notes from David Horne, one of Sir David's "closest advisers", from November 2010, which suggested he knew about the possibility of Ticketus involvement.

He read out the note which said: "Octopus discussion w/CW re £15m possible facility".

The lawyer said: "Octopus was Ticketus so it would seem that one of your closest advisers, David Horne, was aware that Mr Whyte may be looking for a partner, a possibility of £15m by somebody called Octopus."

Sir David replied: "It appears by that note. I've never seen or heard of that."

The court also heard former Rangers chairman Alastair Johnston described the playing squad as a "shambles" and warned Mr Whyte had not been given the opportunity to understand the issues facing the club.

Mr Findlay read from an email from Mr Johnston to Sir David in March 2011 in which he said: "There has been in my opinion no credible opportunity for Craig Whyte in this process that would have allowed him to totally understand the issues that he will face as majority owner of Rangers Football Club."

These included the "shambles" of a playing squad, the upkeep of Ibrox stadium and health and safety-related maintenance.

The lawyer said: "In general terms, you entrusted the club to a board that you believed were capable of following the plan that you had left in place but they bring in no investment, their playing squad ends up as a shambles and this is two months before the deal with Mr Whyte, and the chairman has handed a huge extension to the chief executive.

"You were being let down by people who didn't have a clue what they were doing when running Rangers."

Sir David replied: "I don't agree about the squad being a shambles but the facts are there."

The court earlier heard how Sir David had "minimal" involvement at Rangers from 2009. Mr Findlay said Sir David, at that point, went on to "entrust the club" to a "group of men" including Alastair Johnston.

Mr Findlay added they seemed to waiting on the "Sultan of Brunei" deciding to buy a Scottish football club. The QC pointed out a number of apparently negative issues that arose at the club from 2009.

Concluding his questioning, Mr Findlay said: "From you stepping down as chairman and Craig Whyte taking over, what had these men done to your football club, Sir David?

"What had they done to our club?"

Sir David replied: "The football side was reasonable. They had not generated new funds and I don't think there was an alternative plan to raise new money.

"I think the club was stalling."

Prosecutors allege Whyte pretended to Sir David, and others, that funds were available to make all required payments to acquire a "controlling and majority stake" in the club.

The Crown alleges Whyte had only £4m available from two sources at the time but took out a £24m loan from Ticketus against three years of future season ticket sales.

The court has heard the sale was eventually made to Whyte for £1 but came with obligations to pay an £18m bank debt, a £2.8m "small tax case" bill, £1.7m for stadium repairs, £5m for players and £5 million in working capital.

He also told the court he considered the idea of pre-pack administration for Rangers but dismissed it as not a viable option.

Whyte denies the two charges against him, one of fraud and another under the Companies Act.