The Conservative party is investigating claims by leadership hopeful Kevin O'Leary that one of his rivals is engaging in fraud and vote-rigging.

He has issued a statement accusing an unnamed campaign of using untraceable prepaid credit cards to sign up fake members.

O'Leary says not only violates party rules and potentially the law but is "completely immoral."

Two sources not tied to O'Leary tell The Canadian Press it appears the campaign leadership rival Maxime Bernier is the one under scrutiny.

The alleged scheme involves people on the Ontario P-C party membership list being signed up as members of the federal Conservative party, possibly without their knowledge.

A source inside Bernier's campaign shot back at the rumours they were involved in the alleged fraud by saying if O'Leary spent more time in Canada campaigning "he would be winning instead of whining."

The Conservatives will select a new leader in May.