British café and casual dining company Patisserie Holdings said it had found "significant, and potentially fraudulent accounting irregularities" and suspended its chief financial officer, Chris Marsh.
Hertfordshire Police told the BBC: "A 44-year old man from St Albans has been arrested on suspicion of fraud by false representation. He has been released under investigation", Hertfortshire police also said in a statement.
Patisserie Holdings and the Serious Fraud Office (SFO) declined to comment further.
An investigation into the books is ongoing, but Patisserie estimates that it has a current net debt position of around £9.8mln, compared to a net cash position of £28.8mln which it reported in its half-year results.
It comes just days after the cafe chain said it had discovered a major black hole in its accounts.
It says that it would have to enter administration without an immediate £20m cash injection.
It follows a nightmare week for a business that had a stock market value of almost £450 million on Monday morning.
On Thursday, the group said that unless it could receive an "immediate injection of capital", it would be forced to stop trading, putting 2,500 jobs at risk across the UK.
Patisserie Holdings said it would update the market in due course. They were trading at 429p before its shares were suspended, valuing the business at £440m.The first Patisserie Valerie store was opened in the Soho district of London in 1926 by a Belgian woman, Madame Valerie.
Parent firm Patisserie Holdings has received a winding up petition for its principal trading unit Stonebeach.
"We are going to cease new openings for a period and focus on making the most of what we have, we are going to stabilise our relations with suppliers, landlords, etc., we're going to beef up our systems and controls", Mr Johnson said in an interview with PA. "We are determined to understand the full details of what has happened".
British entrepreneur Luke Johnson owns 37 percent of the high street chain's holdings and is now unable to provide the capital requested.
Marsh, who joined the company in 2006, was an integral part of the company's growth. His experience included finance director roles at two AIM quoted companies, namely Fishworks and Healthy Living Centres.
His arrest and release has come as the chairman, Luke Johnson, has given a £20 million loan to stop it collapsing.
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