Manchester City fear an imminent £50 million UEFA fine for breaking financial fair play laws will wreck their summer market plans.
The Daily Star says City had hoped to splash out £45m on Porto pair Fernando and Eliaquim Mangala.
Etihad bosses have refused to comment on the possible sanctions and are believed to be taking legal advice. But if UEFA go through with their plans it will have a huge impact on City's hopes of winning more trophies.
City, poised to win the Premier League this weekend, had struck a deal with Porto to sign midfielder Fernando and central defender Mangala.
Pellegrini could now be forced to abandon the deal, which would leave the door open for rivals Manchester United to sign Frenchman Mangala instead.
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