Castaignos is considered one of the most exciting young talents in Dutch football and currently stars for FC Twente after having previous spells with Feyenoord and Internazionale.
Still only 21, the striker was offered up to Tottenham this transfer window but Spurs officials soon smelled a rat.
"Castaignos was offered to Tottenham by a rogue group, who allegedly forged a mandate document for a potential sale of the player.
"A Croatian negotiator contacted Tottenham directly, claiming to have the rights to arrange a transfer for Castaignos to England, but the proposed deal quickly unravelled."
Spurs have a good relationship with Twente after buying Nacer Chadli from them last summer, while they also know one of Castaignos' agents as he also works with Moussa Dembele.
Wondering why a Croatian was coming to them directly to offer them a Twente player on behalf of the Dutch club, Tottenham decided to contact Twente to clarify the situation.
It was Twente who then discovered that the Croatian had been working off false documents, which included a fake signature from their chairman Joop Munsterman.
They have since passed on the details to the Dutch FA.
"There has been an attempted fraud when a forged mandate, giving a person the authority to act of our behalf, surfaced. Unbeknown to FC Twente, a player has been offered with this forged document to an English club," the club revealed in a statement.
"The forgery has been made known to the KNVB (Dutch FA), with the request to pass it on to UEFA and FIFA and take the appropriate measures."
The club's finance direction confirmed it was only through Tottenham that they unearthed the scam.
"We have recently been informed of this scam from England. We have sent a letter to the persons who have used the false document, ordering them to stop immediately," said Gert-Jan Nijweide.
One of the agents involved in trying to find Castaignos a new club, US-based agent Danny Budimir, said he had no idea the mandate was fake and offered his full cooperation.
"I was approached with this mandate to try to help find a club for Luc Castaignos in the MLS.
"I have seen false mandates before, but never a fake mandate from the club. I'm happy to assist the Dutch federation and FIFA with any investigations," he said.
Budimir was one of three agents who received letters from the Twente threatening police action.
Castaignos for his part looks set to stay at Twente for the remainder of the season at least. He has scored 11 goals in 19 matches this season for Twente, who currently lie third in the Dutch League table.