Elie Yusuf Najem, who has previously claimed to be worth $45 billion and to have built the Penang Bridge was seized at his home by police late on Sunday afternoon.
Malaysia's Star newspaper reported that Najem owed workers unpaid wages totalling 360,000 ringgit ($95,000). He is also rumoured to owe thousands of dollars in unpaid bills.
The 45-year old was due to appear before a judge on Monday suspected of "cheating", a legal term that covers numerous financial crimes.
''Dr Elie'', as Najem has been dubbed locally, provoked furious media speculation and a flurry of police complaints when earlier this month he declared he was going to donate $275 million to the National Cancer Council (Makna).
According to Aljazeera's bureau in Kuala Lumpur, the announcement preceded several unusual claims from the previously unheralded Najem.
Claiming to have made a fortune in the telecommunications and property industries, he has said he is personally worth $45 billion. Such a fortune would make him the world's third-richest man, yet there is no mention of him on the Forbes list of the world's richest.
Aljazeera in Kula Lumpur also says that Najem has also claimed in the media that he built the 13.5km Penang Bridge and had been collecting tolls from it for more than 35 years.
The bridge, however, was only opened to traffic in 1985.
Media interest in Najem's background was fuelled by his initial gesture of goodwill.
"He did not realise the magnitude of the media coverage"
AB Shamul, political commentator
It has emerged that he entered Malaysia in June last year, originally seeking medical treatment. He has also converted to Islam and married a 19 year-old Malay girl, though there are doubts of the validity of the wedding certificate.
The New Straits Times newspaper in Malaysia has reported that Najem is also wanted in Cyprus, Lebanon and Canada for a number of unspecified offences.
Some observers agree that while he may have personal problems, his original gesture may have been harshly treated by some sections of Malaysia's media.
AB Shamsul, a political lecturer with the University of Kebangsaan in Malaysia, told Aljazeera that Najem's biggest mistake may have been to underestimate the impact his announcement would have.
"It was a different situation to the one he expected, he did not realise the magnitude of the media coverage he'd attract," Shamul said, "or the level of manipulation his personality and person would undergo."
While acknowledging that the businessman may be of unsound mind, Shamul said it was disappointing that his promise of a donation was treated with such cynicism in the media.
He said: "I feel very sympathetic because he may genuinely want to donate. It is ironic, because he is generous the first reaction is 'why has he got so much money?'"
Makna declined to comment on whether they had received any donation from Najm.
Najem can now be held for up to 14 days by police as they investigate the charges.