Tycoon with own currency is arrested over £1bn fraud

Kazutsugi Nami, chairman of a bankrupt bedding company, had offered investors 36 per cent annual returns on their money and issued his own electronic money. The 75-year-old built a cult status among the 37,000 investors in his company.

Nami was drinking a beer when police, accompanied by reporters, seized him in a restaurant close to his office in Tokyo at 5.30am today. "It was not a fraud," he said as he was led away. "The police have destroyed my businesses. I am a victim of the police investigation." Asked if he felt sorry for his investors, he replied, "No. I have put my life at stake."

Nami and other executives at L&G allegedly collected funds from clients despite knowing they could not pay the promised investment returns.

He also collected funds by issuing "enten'' — divine yen— which were stored on mobile phones and which could be used to buy mattresses, food, clothes and jewellery at markets and in online shops. The NTV network showed an "enten fair" where participants sang the praises of the investment plan. Nami wooed his "shareholders", saying he had a "divine decree" to "eliminate poverty from this world", according to lawyers representing his victims.

Those who introduced new investors to the company were rewarded with commissions. In 2005, the company set up a "research institute", called the Akari Laboratory, which was registered as a non-profit organisation dedicated to revitalising local economies. Famous musicians and distinguished academics performed and lectured at events organised by Akari.

L&G was established in 1987, at first selling bedding and health products. It began its investment scheme, including the issuing of enten, in 2001. The company stopped paying cash dividends in February 2007, and by September of that year had sacked most of its employees, the news agency Kyodo reported. It folded in November 2007 and is now undergoing a bankruptcy process.

Nami, who favours pin-striped suits, admitted in 2007 that he never used enten himself. Asked whether his salary was paid in enten, he replied, "God no, my salary is paid in yen."

Two months ago Bernard Madoff, the former chairman of the Nasdaq stock market in New York, was arrested for using billions of dollars in a pyramid scheme.