The chairman of Hyundai Motor Group, Chung Mong-Koo, has been arrested in South Korea on embezzlement charges.
Chung is being charged with embezzlement
Mr Chung and Hyundai are accused of creating slush funds to pay politicians and officials for business favours.
A Seoul judge said earlier that he had issued the arrest warrant because he feared Mr Chung may go into hiding or tamper with evidence.
Mr Chung denies the charges. A police probe into the scandal at the carmaker first started back in March.
South Korean prosecutors said that after arrest Mr Chung will be taken to the Seoul Detention Centre, where prosecutors will continue to investigate him before formal charges are brought.
Under South Korean law they will be able to question Mr Chung for a maximum of 20 days before being charged.
Following the earlier issuing of the arrest warrant, a Hyundai spokesman said vice chairman and chief executive Kim Dong-jin would now assume full responsibility and operational control at the carmaker.
"All local and overseas manufacturing, sales marketing and R&D operations are unaffected by today's development and will continue normal operations," he added.
Prosecutors have already raided Hyundai's offices over the scandal and questioned key officials.
Mr Chung is accused of raising about 130bn won ($138m; £76m) of slush funds since 2001.
Two lobbyists have also been arrested on suspicion of receiving money from the company, although it is unclear whether they actually sought to pay government officials.