Two contestants on Simon Cowell and ITV's crisis-hit, £1m gameshow, Red or Black?, have been removed from the final stages of the series following an investigation into their backgrounds.

In the wake of the tabloid storm over the former criminal Nathan Hageman scooping the first jackpot, co-producers Syco and ITV have made more detailed checks on the remaining contestants.

The Guardian has learned that one contestant did not reveal when asked that he had a criminal record and he will not appear on the show. It is understood the contestant is yet to appear on-screen.

A second contestant has also been removed although it is not yet known what, if any, crime they committed.

The two were due to appear on different nights but will not be replaced due to the nature of the gambling show.

However, the producers and broadcaster face a legal minefield if they ban people from taking part in the show who have committed an offence and served their time in prison.

Part of roulette-based Red or Black? is pre-recorded with the final broadcast live, giving the producers a small window in which to do more background checks on people.

Sources say the sheer scale of super-sized gameshow, with 1,000 contestants taking part in the first stages, and the fast turnaround of the show means it is difficult to do very detailed checks on people.

Syco and ITV have been in intense talks after it emerged that Hageman was allegedly jailed for beating up a woman.

Although the producers knew he had served a prison sentence for assault it is understood the full details were not known.

It is understood that, legally, Syco and ITV found their hands were tied with regards to Hageman as he had declared he had a criminal record.

Discussions between the two companies are taking place and talks will continue after the series has finished about how producers can use discretion to choose contestants.

However, broadcasters could face legal challenges from former criminals who have served their sentences but find themselves banned from TV shows.

One source said: "It's a legal minefield for Syco and ITV."

The Daily Mirror reported that Cowell was "seething" after it was agreed that Hageman had to be allowed to keep the prize.

Relations between Syco and ITV are said to have been strained after Cowell appeared to distance himself from the decision to allow Hageman to keep the prize.

Sources also said Cowell had been advised that the only way of "the no-win situation" was to see if £250,000 of the £1m prize money could go to Hageman's victim.

Although Red or Black? is a co-production between Syco and ITV, Cowell felt that with the crisis deepening he should speak about the issue and will do so at a press conference on Thursday.

Just one series of Red or Black? has been ordered and after the show finishes on Saturday night, Syco and ITV will sit down to discuss how the game show's format could change in the future, if it returns.

Despite, or perhaps because of, the publicity Red or Black?'s ratings increased after a bumpy start and it averaged 5.2 million viewers on Monday night.

It was off air last night due to England's Euro 2012 qualifier against Wales at Wembley – which netted about 9 million viewers – but will be back on ITV1 this evening.

An ITV spokesman said: "ITV has reviewed the background checks on remaining contestants from Red or Black?. As a result of this we have asked producers to remove two contestants from this week's shows. Red or Black? will continue on these two occasions with seven, rather than eight, contestants."

"Red or Black? is a co-production between ITV Studios and Syco for ITV Network and all parties are working closely and collaboratively together to ensure that the show continues its success."

• To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly "for publication".

• To get the latest media news to your desktop or mobile, follow MediaGuardian on Twitter and Facebook.