Tapas Pal was questioned for hours by the CBI before his arrest.
Tapas Pal, a senior leader of Mamata Banerjee's Trinamool Congress, has been arrested in Kolkata in what is referred to as the "Rose Valley chit fund scam", in which thousands of small investors were allegedly cheated.
Directly linking the arrest to her party's aggressive opposition to Prime Minister Narendra Modi's notes ban, Ms Banerjee said: "Modi Babu, how many MPs and MLAs (lawmakers) do you want to arrest? They will stand in queue."
Mr Pal, 58, was questioned for hours today by the CBI before his arrest. His house was also raided earlier.
The actor-turned-politician was a director in two companies of Rose Valley, a leisure and entertainment group accused of cheating 17,000 crores in small savings through a Ponzi scheme. The group has been investigated for almost two years.
Officials say the lawmaker is suspected to have benefited from the scam that surfaced around the same time as the Saradha case - the other scam involving low income investors roped into unregulated schemes. The chairman of the Rose Valley group, Gautam Kundu, was arrested earlier by the Enforcement Directorate.
Another Trinamool lawmaker, Sudip Bandopadhyay has also been summoned in the case but he has said he will appear for CBI questioning only next week.
The Trinamool has alleged that the centre is using the CBI to target its leaders for political vendetta.
"Today is 50 days. They knew we will question the PM so they arrested my MP," the Chief Minister said, referring to PM Modi's statement while announcing the notes ban that he would clean up the system in 50 days, till December 30. "We have a whole list of people they want to arrest," she added.
Ms Banerjee has demanded the Prime Minister's resignation, alleging that he has failed to deliver on his commitment to resolve the problems arising from demonetization by the end of the year.