The suspended finance chief of Patisserie Valerie has been arrested on suspicion of fraud.
It comes just days after the cafe chain said it had discovered a major black hole in its accounts.
The company’s parent firm, Patisserie Holdings, said in a stock market announcement on Friday that Chris Marsh, who was suspended from his role earlier this week, has since been released.
Hertfordshire Police 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 probe is being led by the Serious Fraud Office (SFO).
The SFO said: “Following this morning’s Regulatory News Service announcement by Patisserie Holdings PLC, 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.”
The arrest was followed by the closure of some shops on Friday.
Landlords for at least two Patisserie Valerie locations in London – in Hammersmith and Edgeware Road – cancelled their lease agreements with the company over breach of contract.
It is understood that the company has failed to pay rents.
Patisserie Holdings said on Wednesday that it has been notified of “significant, and potentially fraudulent, accounting irregularities and therefore a potential material mis-statement of the company’s accounts”.
This significantly affected the company’s cash position, with the firm saying it could lead to a “material change” in its overall financial position.
Mr Marsh was later suspended from his role and accountancy giant PwC drafted in to look through the company’s books.
It relates to £1.14 million owed to HMRC.
The cake chain has now warned that it will cease trading without an “immediate” cash injection.
The firm could be forced to appoint administrators as early as Friday.
Emergency fundraising talks overseen by advisers to Patisserie Holdings were continuing on Thursday evening. Other options on the table include a loan or a rights issue.
Chairman Luke Johnson is said to be considering stepping in with funds that could help save the business.
Mr Johnson, a serial entrepreneur, is the largest shareholder in Patisserie Holdings with a 37% stake.
If a buyer for the group does emerge, any purchase is likely be conducted via a pre-pack administration process, where a new owner is able to shed onerous liabilities.
PwC, which is working with the firm on its financial position, is the most likely to carry out the insolvency, but several other corporate undertakers are also thought to be waiting in the wings.
Patisserie Holdings – which owns additional brands like Druckers, Philpotts, Baker & Spice – trades from more than 200 stores and also has a partnership with Sainsbury’s, with branded counters present in the supermarket.