Patisserie Valerie's finance director has been arrested as part of a fraud inquiry as the company scrambles to secure its future.
The upmarket baked goods chain, which had warned on Thursday its current business was at risk of collapse without an immediate injection of cash, said Chris Marsh was held last night before being released on bail.
Hertfordshire Police later said: "A 44-year old man from St Albans has been arrested on suspicion of fraud by false representation.
"He has been released under investigation."
The Serious Fraud Office (SFO) also added: The SFO confirms that its director has opened a criminal investigation into an individual.
"We can give no further information or comment at this time."
Patisserie Holdings suspended trading in its shares on Wednesday after the board said it was looking into "potentially fraudulent accounting irregularities" resulting in a misstatement of its financial position.
Mr Marsh was suspended from his role while the circumstances of the financial black hole were examined internally.
A story by Sky News on Tuesday suggested the sum could exceed £20m.
In a separate development on Friday the accounting watchdog, the Financial Reporting Council, confirmed it was looking into the firm's announcement of possible fraud.
Among the company's headaches was a disclosure this week that the board had just learned of a winding-up petition that had been filed against its main subsidiary by the taxman.
It related to more than £1.1m said to be owed to HMRC.
Patisserie Holdings has more than 200 stores – the vast majority of them under the Patisserie Valerie brand.
It employs more than 2,500 people.
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A further statement was expected from the company later on Friday to update investors on the hunt for new capital to shore up its finances.
Options are said to include restaurant entrepreneur Luke Johnson, who is the chairman of Patisserie Holdings and its largest shareholder, coming up with extra money.