Two men who gave money to a think tank were not told it would be used to fund Peter Hain's Labour deputy leadership bid, the BBC understands.
Mr Hain is facing a call for his resignation
Diamond dealer Willie Nagel and another man, who did not want to be named, gave and loaned a total of more than £35,000 to the Progressive Policy Forum (PPF).
Both say they had no objection to the money being used to fund the Welsh Secretary's campaign but were not told.
Mr Hain says all PPF donors were asked whether funds could be transferred.
A source has told the BBC Mr Nagel said he "was not surprised" and "not unhappy" that the money had ended up being used for Mr Hain's campaign.
And in a statement issued through his solicitor, Mr Nagel said he had known Mr Hain, who is also work and pensions secretary, since 2000 and "respected" his work.
Mr Hain admitted on Thursday he had failed to declare 17 donations totalling £103,000 to his failed campaign to be Labour's deputy leader.
He has now identified all of the donors, saying the late disclosure was an innocent mistake caused by overwork, but the Electoral Commission has said it is investigating whether electoral law has been broken.
The Parliamentary Standards Commissioner has also launched an investigation following a complaint by Conservative MP David Davies, who says Mr Hain should have registered the donations with the Parliamentary authorities within four weeks of them being made.
The undeclared donations accounted for more than half Mr Hain's total campaign spending of £191,300.
According to a statement issued by Mr Hain on Thursday, he had been forced to seek additional donations after the contest finished in June last year when a number of unpaid invoices came to light.
Six of the donations were made by individuals through the PPF, a virtually unknown think tank which has a registered address at a London solicitor's offices.
It was set up in December 2006, three months after the launch of Mr Hain's campaign, and counts John Underwood, who was closely involved in financing the Hain campaign, as a trustee.
In his statement, Mr Hain stressed that there was nothing illegal about using a third party to donate money, provided the original source of the donation is registered.
Background notes issued with the statement said: "When unpaid bills came to light PPF was approached and with the permission of the individual donors concerned the monies were donated to Hain4Labour."
This account would appear to be at odds with that given by Mr Nagel and another donor who spoke to the BBC - although both stress they had no objection when they learned the money had gone to the Hain campaign.
'No big deal'
Elfyn Llwyd, Plaid Cymru's leader in Parliament, told BBC Wales the latest revelations meant Mr Hain's position was no longer tenable.
He called for Mr Hain's resignation accused him of "playing fast and loose with the law."
But Prime Minister Gordon Brown is standing by Mr Hain and the Conservatives say they are holding off from calling for his resignation until the standards commissioner produces his report.
Labour MPs have also rallied to Mr Hain, with former deputy leadership contest rival Jon Cruddas describing him as "a very straight bloke".
Martin Linton, who was part of Mr Hain's campaign team, said he had "never heard" of the PPF think tank.
But he added it was not "a big deal" and that such things could "happen very easily in politics".