China Markets Probe: Top Fund Manager Xu Xiang, Two Others Arrested For

A brief statement issued Monday through the official Xinhua News Agency said Xu was suspected of illegally obtaining inside information about the stock market and manipulating prices.

The Chinese authorities have recently been increasing the pace of their investigations into activities they suspect may have worsened the massive stock sell off this summer.

These two execs join a growing list of those swept up in the ongoing stock fraud crackdown in China.

Since China's stocks plunged in mid-June, the country has intensified probes into market manipulation which have so far netted journalists, senior executives in brokerages and even securities regulators. He joins executives from a number of Chinese banks and financial institutions to have been arrested following investigations into who profited from the market volatility, including Agricultural Bank of China Ltd. President Zhang Yun, who was taken into custody to "assist" with an investigation, noted Bloomberg.

While in the past Xu walked to his Shanghai office every morning from his home across the street, wearing a pair of kung fu shoes and with his head lowered, in the past year he was rarely seen, the building official said. A squad of Chinese highway patrol cars on Sunday sealed off the Hangzhou Bridge in eastern China for more than 30 minutes while officers surrounded Xu's vehicle, eventually leading the Armani-clad billionaire off in handcuffs.

Two other funds he managed were also very profitable, scoring a return-on-investment ratio of 198 percent and 175 percent past year to rank among the top 10 investment funds in the country, reports simuwang.com, a data provider.

While private investment firms are broadly categorized as hedge funds in China, they differ from their global counterparts in not making extensive use of hedging strategies amid restrictions. Margin requirements were raised, short selling was prohibited and position limits tightened in what was the world's most active futures market.

Yishidun and Huaxin had "foreign technological support" in developing high-frequency trading software, Xinhua said, without naming any firms.

High-profile Chinese investor Xu Xiang has been detained on suspicion of insider trading, the Public Security Ministry reported.