Angry Tesco investors want £100 million from the supermarket over its accounting black hole
Bentham Europe, which is funding litigation, confirmed the legal action in an email sent to Business Insider.
125 institutional funds have brought a joint claim against Tesco, claiming that its actions during the scandal - when it overstated profits by an initial £263 million - amount to a breach of the Financial Services and Markets Act and cost them millions of pounds.
The case will argue that Tesco made misleading statements to the markets, which was then relied on by investors to make decisions.
Sean Upson, a partner at Stewarts Law, which is leading the case, said in a statement given to the Financial Times: "Tesco has misstated its accounts and in particular its treatment of payments from suppliers to give the appearance of static trading margins. The reality is that those margins were falling. Institutional investors were therefore misled when making investment decisions in respect of Tesco.
"This is precisely the type of wrongdoing which the Financial Services and Markets Act was designed to redress and therefore to prevent."
Jeremy Marshall, chief investment officer of Bentham Europe, which is funding litigation, told Business Insider: "Misstatement of profits leading to a dramatic collapse in the Tesco share price caused substantial damage to many shareholders who manage money for thousands of investors."
"Investors have a right to rely on statements made by companies to ensure that they correctly allocate capital," he added."
Tesco did not immediately respond to a request for comment.
It was reported earlier this month that around 60 large investors, including pension funds from across the UK, Europe, and USA, along with other asset managers, are involved in the case.
Tesco got into trouble after it initially admitted that it had overstated its profits by £263 million in 2014. That overstatement was later revised upwards to £326 million. Auditors found that profits had been overstated by Tesco after it recorded payments from suppliers before the money was due.
Tesco's share price dropped by around 20% as the scandal broke, costing many investors huge amounts of money. It is these losses that investors are now looking to recoup through legal action.
Tesco has already been forced to pay out significant sums of money to investors over the scandal. Last November, it agreed to pay $12 million (£8 million) to settle an action by American shareholders which claimed that Tesco's accounting irregularities inflated the supermarket's share price.
The news comes roughly one month after it was announced that three former executives from Tesco had been charged with fraud and false accounting related to the overstated profits. Carl Rogberg, Christopher Bush, and John Scouler were all charged with one count of fraud by abuse of position, and one count of false accounting during an investigation into Tesco's accounting practices.