Li Tuchun, founder and former President of Taizinai, a leading Chinese fermented yogurt producer, has been arrested on charges of illegal fund raising, along with three high-ranking executives of the company.

Initial investigation shows that beginning in February 2008, Taizinai raised more than 137 million yuan ($21 million) in a desperate bid to rescue the company from financial problems. The funds were illegally collected from the company's distributors, employees and the public. The company failed to repay most of the money.

Li, 50, founded Taizinai in 1996 with 1 million yuan ($150,000). The company became an industry leader after 10 years' development, with accumulated sales topping 5 billion yuan ($750 million).

Rapid expansion in recent years, however, resulted in the company taking on a debt of over 2 billion yuan ($300 million). Its overseas debtors included Morgan Stanley, Actis Capital, and Goldman Sachs.

In July this year, the local court in Zhuzhou, where Taizinai is based, accepted a bankruptcy lawsuit against the company and ordered it to carry out debt restructuring.