The Overseas Investment Office is taking civil proceedings against bankrupt businesswoman May Wang to take back four dairy farms purchased without approval.
Land Information Minister Maurice Williamson told Parliament the unauthorised purchase of the farms came to light while the OIO was processing the application by Hong Kong-based Natural Dairy Holdings in 2010 to buy the 16 Crafar farms.
The office turned down Natural Dairy's bid on the basis that its representatives, who included Ms Wang, failed to meet the good character test.
Mr Williamson said the four dairy farms were bought without any approval being sought from either OIO or the minister.
"As we began process to make them divest themselves of those farms we were notified by the courts in Hong Kong that charges of corruption had been laid against them and a stay had been put on those farms as they were assets involved in the court case".
Mr Williamson said now the stay has been removed, the Overseas Investment Office has decided to bring civil proceedings to make those farms be down sold.
He told Morning Report the illegal buy-up of farms will prove very expensive for those involved.
"They will lose their assets, it will have cost them a fortune. I'd have to say you'd have to be an idiot to try and break the law, buy some land illegally."
The Serious Fraud Office says a case against May Wang and associates is still proceeding in Hong Kong.
Wang, now known as May Hao and two others are facing conspiracy and money laundering charges brought by the Independent Commission Against Corruption (ICAC) in Hong Kong.
The Serious Fraud Office, which has been helping with the case, says the defendants are due to appear again on 14 September at a preliminary hearing at which the ICAC will formally present its evidence.
It says a trial date may also be set.