Northumbria Police are probing 51 different claims of irregular financial dealings involving Washington Mortgage Centre, based in the Wearside Galleries shopping centre, reports the Sunderland Echo.
Earlier this year, police launched an investigation into the Centre after a number of customers reported they were unable to access money invested through the centre.
The probe is understood to have grown considerably over the past few months and is believed to now involve millions of pounds.
Wealthy businessman David Reid, 49, who is also a member of the Durham North West Labour Party, has been arrested by investigating officers on suspicion of fraud. He was also suspended by the Labour Party earlier this year.
A Labour North spokesperson said: “David Reid has been suspended form the Labour Party pending the outcome of any police investigations.”
Officers have also searched Mr Reid’s home, a large detached house at St John’s Mews in the village of Burnhope, County Durham, and an office linked to the Washington Mortgage Centre, in Washington.
A 41-year-old woman has also been arrested in the investigations on suspicion of laundering money.
DCI Christina Barrett said: "We know that a lot of people are very concerned about their dealings with this business, often involving large sums of money.
"We have received a number of allegations of financial irregularity relating to investments made through the Washington Mortgage Centre over a number of years.
"I would like to appeal for anyone who has been involved financially with the Washington Mortgage Centre and who has any concerns to contact one of our officers on the 101 non-emergency number.”
Investors who claim they are victims of the suspected fraud have contacted the Sunderland Echo claiming they have lost hundreds of thousands of pounds through the company.
A number of these investors say they are now supporting each other as the case progresses and are working to get their money back.
One man, who asked not to be identified, told the Echo: “We lost money when we went to remortgage a property. We were told the money had been put into an off-shore account.
“Then all of a sudden, we could not get in touch with anyone at the company for love nor money that was when we called the police.”
Other suspected victims claim they lost inheritance money and cash they had put away for their children.
The complex financial investigation has been ongoing since January of this year, but officers are understood to be investigating alleged financial irregularities stretching back a number of years.
One investor said: “I think the complaints started last summer and slowly built up over the next few months. It was then the investigations began.”
Mr Reid is due to answer bail next month.
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