Club have been banned from making any player transfers for the next two transfers windows by FIFA on Thursday.
FIFA, football's world governing body, have banned Chelsea after French Ligue 1 club RC Lens made an official complaint over Chelsea's signing of their young player Gael Kakuta in 2007.
RC Lens claimed that Chelsea 'Tapped-up' the French Under-17 player, who moved to Stamford Bridge in 2007, with Chelsea having been found guilty of forcing Kakuta to break his contract with the club.
18-year-old Kakuta has been banned for 4 months and been fined €780,000 (£680,000) due to a breach of contract with his old club in the summer of 2007.
FIFA's Dispute Resolution Chamber (also known as the DRC) has looked into the transfer and has banned Chelsea from signing any new players during the next two transfer windows, which means The Blues won't be able to make any player transfers until January 2011.
FIFA relseased the following statement on their website: "On the occasion of its last meeting held on 27 August 2009, the Dispute Resolution Chamber (DRC) was called to pass a decision in a contractual dispute opposing the French club Lens to the French player Gael Kakuta and the English club Chelsea.
"The French club had lodged a claim with FIFA seeking compensation for breach of contract from the player and requesting also sporting sanctions to be imposed on the player and the English club for breach of contract and inducement to breach of contract respectively.
"The DRC found that the player had indeed breached a contract signed with the French club. Equally, the DRC deemed it to be established that the English club induced the player to such a breach.
"As a result the player was condemned to pay compensation in the amount of €780,000, for which the club, Chelsea, are jointly and severally liable, and sporting sanctions were imposed on both the player and Chelsea in accordance with art. 17 par. 3 and 4 of the Regulations on the Status and Transfer of Players.
"A restriction of four months on his eligibility to play in official matches has been imposed on Kakuta. Chelsea are banned from registering any new players, either nationally or internationally, for the two next entire and consecutive registration periods following the notification of the present decision.
"Furthermore, the club, Chelsea, have to pay Lens training compensation in the amount of €130,000."
Chelsea are yet to make a statement, but are expected to appeal the decision.
Further updates will appear here shortly.
