Nigel Farage is facing a possible libel case from a former Ukip MEP who defected to the Conservatives.
Mr Farage attempted to play down Amjad Bashir's decision to switch sides in January by insisting that the former communities spokesman had already been sacked over alleged financial irregularities and claims of the employment of illegal immigrants in his restaurant business.
Solicitors' firm Atkins Thomson confirmed it has sent a "letter before action" to Ukip warning of High Court action against the party and its leader.
Mr Bashir, who was elected Ukip MEP for the Yorkshire and Humber region in the 2014 European Parliament elections, is awaiting a response and no date has been set for a court case.
A Ukip spokesman said the party was making no comment on his case.
After quitting Ukip in January, Mr Bashir branded Mr Farage's party "pretty amateur" and accused it of a "ridiculous" lack of policies.
Questioned at the time about Mr Farage's accusations, Chancellor George Osborne said he was "absolutely comfortable" about Mr Bashir becoming a Conservative MEP.
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